Intercompany accounting (aka “interco”) is time-consuming, labor-intensive and difficult. The challenges inherent in accounting for multiple entities can even deter businesses from pursuing growth plans that involve mergers or diversification. However, the right accounting software can simplify the process and allow companies to expand and maintain effective, timely accounting and reporting across more than one business entity. Acumatica offers its Advanced Intercompany Solution (AIS), which solves many of the thorniest problems in intercompany accounting. AIS enables automated accounting and financial management for multi-tenant company operations.
Here are five of the most common areas of challenge that AIS helps address:
#1 – Multiple Companies’ Accounting and Operations
Managing accounting between multiple entities such as tenants, companies and branches is one of the largest intercompany accounting challenges companies face. If the systems within different entities do not communicate with each other, this can easily lead to errors. This is especially true if the entities operate with different base currencies.
Intercompany accounting software should support multiple entities on different base currencies, charts of accounts (COA’s) and calendars. Acumatica’s AIS supports the use of multiple base currencies, along with accounting and inventory transfer with automatic allocations and disbursements. It incorporates auto due-tos and due-froms. The software also centralizes payable and receivables to a central office, while restricting user access to assigned sites. It provides the flexibility to close entities at different times for period ends.
#2 – Sales and Inventory Management
Sales and inventory management becomes more complex when multiple companies and currencies are involved. Centralized purchasing and invoicing through integrated accounts payable (AP), accounts receivable (AR) and sales order management can simplify the process. With AIS, entries for intercompany transactions are automatically created to keep accounts in balance. Sales orders can be initiated from one company, and then invoiced and collected through a centralized accounting function. AIS enables more efficient management of warehouses controlled by separate entities by assigning inventory to a specific company and initiating inter-company transfers to preserve company-level reporting with centralized profitability reports.
#3 – Financial Management
Financial management across multiple entities presents challenges in terms of cash management, vendor payments and customer invoicing. With AIS, companies can manage financial periods separately between each company, and close books separately between each company. Bank accounts can be linked to specific companies for exclusive use, with cash assigned to specific accounts in the Cash Management module. Companies with multiple legal entities within the same tenant can have different fiscal year-end dates. The initiating company can maintain income and expense attribution.
#4 – Reporting Across Multiple Entities
AIS allows customized reports to be delivered across one or more companies, generating consolidated reports that accurately reflect company-wide results. Individual ledgers can still be maintained for each company, while inter-company transactions can be automatically reported across multiple companies.
#5 – Intercompany Maintenance
Intercompany management and maintenance become much easier to handle when using a software solution specifically degined for interco maintenance. AIS, for example, is able to reduce potential errors with a centralized view of transactions. The software lets related companies share vendor and customer records, navigating between companies and branches representing separate legal entities.
These are just five of many issues that arise when trying to get on top of intercompany accounting. It can be a lot to think about. We can help. We have worked with many companies on the implementation of a customized AIS solution that fits their unique interco needs. Contact us for a demo and dialogue about aligning AIS with your multi-entity structure.