Inter-company reconciliation process flow sample

By Stefan Farrugia on 2018-02-01

The most important element in your inter-company reconciliation process flow will always be your people. No matter how advanced the technology, you will need good people and the right processes to make the magic happen.

When preparing for the consolidation of financial reports, organisations with multiple subsidiaries need to reconcile activity between reporting entities. During this consolidation process, some transactions between entities will need to be eliminated in order to ensure reporting is as accurate as possible.

Often these figures are affected by discrepancies created by miscalculations related to the timeliness of recording transactions, currency exchange rates, or simply human error.

The traditional approach to inter-company reconciliation is to collect data from all subsidiaries and run reconciliation reports on this data. The problem with this approach is that the sources of this data differ a great deal, as do the tools used to run the reconciliation. Often users are looking at a scenario which uses a combination of Excel sheets and a consolidation tool.

Once the reconciliation is completed, this data is sent back to the various entities for analysis. At this stage, the error-discovery process begins and, the information is relaying between various entities until the issues are resolved. This process is very slow and is usually carried out by e-mail or over the phone as users try to understand which transactions don’t reconcile and why. This takes a tedious process.



Process flow

When company structures adopt a tool that allows them to share inter-company data and oversee reports at every stage, it becomes easier to tackle errors and lack of reconciliation before the final data is extracted for the final reporting.

By introducing smart technologies, a new process that involves people, systems, and technology come into play to create a new workflow. One that is more interconnected at an earlier stage.

People, processes and technology will always play key roles in the improvement of the close process. All three need to be considered as part of the same flow to identify the shortest path to success.

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