Intercompany eliminations – or even better, victories

Intercompany eliminations – or even better, victories

October 19, 2015 Evan Webster  
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Persistent Excel use for intercompany eliminations is painful for accountants…but ripe for automation.

Over the years, I have helped customers around the world improve their consolidation processes. It’s always gratifying to see a smile on a customer’s face when you make their jobs a little easier. One area that has been particularly painful for many companies has been the elimination of intercompany balances. Given my experience in the field, I can say that I’ve been a frequent witness to the frustrations of many accounting and finance professionals in reconciling these intercompany balances.

One such story was quite memorable. About five years ago, a colleague of mine was in Europe working as a consultant for a US-based parent company that had just made a sizable acquisition in Malta. That acquired company owned about 50 subsidiaries with intercompany activity between virtually every entity. The process that their accountants went through every month was manual, long and tedious, and was also met with challenges communicating with people across the globe. The accounting manager was visibly frustrated by all of these challenges and could never seem to get the intercompany accounts reconciled properly every month.

He decided to roll up my sleeves and get to work to help this poor lad.

We identified every intercompany entity in their chart of accounts and tagged them as such in the consolidation solution we implemented for them. We then strategically placed “dummy” elimination entities at each level of the company hierarchy, allowing the system not only to match each intercompany relationship automatically, but also to generate eliminating entries in the same automated fashion. Perhaps the best part was we were able to generate an instant report of every intercompany relationship – by entity and trading partner, and by account.

The process went from weeks to mere days, and the accounting manager was ecstatic. I remember first showing him that reconciliation report, and when he looked at it, he told me how happy he was, and if it worked, he would “give me a kiss”. Sure enough, when the process was up and running, in true European tradition, he thanked me and kissed me on both cheeks!

Talk about making someone’s day. Given that my mantra has always been about making life easier for accountants worldwide, it was a watershed moment.

Fast forward to today, and I find that more and more companies are dealing with the same challenges with reconciling intercompany balances. While there are solutions out there that can assist with this process, accountants remain largely unwilling to give up their spreadsheets for a sophisticated, proprietary solution that may solve these and other consolidation challenges. So, why SHOULD they give up what they already know and are used to?



Consider this for a moment. The company I was referring to above spent hundreds of thousands of dollars to implement a consolidation tool where one of their biggest challenges was intercompany balances. Each accountant around the world was forced to relearn an entirely new software tool to perform these tasks. And, while we were ultimately able to solve their reconciliation challenges, we found that they were still using Excel to augment their processes.

This story illustrates perfectly why we took a different approach at Vena. We started the company on the belief that Excel can and should continue to play a vital role in enterprise finance and business processes. So we set out to develop solutions that:

  • Keep your users in Excel, while automating your intercompany reconciliations and other financial close processes such as currency translations, account reconciliation, consolidations and reporting;
  • Go beyond point solutions (like account reconciliations and intercompany eliminations) to offer a unified, end-to-end solution to automate the entire Financial Close Management (FCM) process;
  • Meet truly enterprise-grade needs with features including a centralized database, source system integration, workflow, version control and a detailed audit trail.

The next time you get to work on your quarterly or month-end close, try to keep this story in mind. Look at the tools and processes you are using now and ask yourself:

  • Is my financial close taking longer than it should (i.e. 3-4 days)?
  • Even with a fast close cycle, am I making the most efficient use of my team and resources?
  • How much manual effort is involved in the process?
  • Is my team using the right tools, and how much are they reverting to Excel?
  • If I need a new solution, do I want to replace the tool that my team already knows and loves?

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Vena automates time-consuming financial close processes, e.g., data collection, account reconciliation and inter-company transactions.

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