2 minute read 24 Jul 2023
Engineers meeting in technology research laboratory

Why truly fixing supply chain problems starts inside your network

By Darren Rykers

EY Global BlackLine Alliance Leader

Finance tech leader focused on finance and accounting operations and financial corporate performance management. Professional with a global mindset who drives efficiency and transparency.

2 minute read 24 Jul 2023
Related topics Supply chain

Explore the hidden role intercompany solutions play in supply chain excellence.

In brief

  • As supply chain operations digitize, supply chain leaders should ensure that internal network transactions are managed correctly.
  • Global challenges require worldwide change. It’s time for supply chain leaders seeking resiliency to look closer at intercompany transactions.

Remember when keeping it in the “family” seemed like a smart fiscal choice? Orders, money and deals stayed between the various disciplines and departments of cross-border companies, allowing organizations to retain total control of their business. But then the pandemic's disruption to global supply chains meant operators turned to third-party logistics partners as workarounds for the agility needed to sidestep market challenges — which brought additional risk. CFOs continue to face considerable pressure to deliver more, faster and with less exposure. Consequently, many are looking internally to intercompany trade to create efficiencies and de-risk their supply chains.

As they do that, they’re encountering considerable problems: inconsistent data processes and technologies that don’t work together effectively and legacy data platforms no longer capable of either working in the ways or at the speed that modern supply chains demand, let alone managing the volume of daily transactions. While intercompany transactions may present an opportunity for control and cost savings in an ideal world, in reality, many problems require fixing before that potential can be realized. Enter new process-enabling technology to make intercompany solutions work harder for every supply chain operator. If all of that sounds familiar,  if you’re a CFO charged with the daunting task of helping your organization deliver better products and services while reigning in threats to the bottom line, then this story is for you.

Scale of the challenge is enormous

With an estimated 70% of global business now flowing through large multinational corporations, driving hundreds of thousands of transactions every day, and increasing organizational exposure to more risk, the scale of the challenge to streamline intercompany trade is enormous.

Take the flow of goods through an organization’s multinational supply chain from initial purchase order to final sale for example – a journey that includes countless transactional touchpoints, calculations and processing requirements. Country-specific tax and statutory regulations must be met, too as well as addressing the complexity of transfer pricing, indirect taxes, and fluctuations of exchange rates. These challenges compound when combined with the need to manage a high-volume of entries for fulfillment, partially-filled orders, delivery, discounts, and re-bills.

Cross-border transactions are also impacted by multi-ERP environments and must pass through multiple accounting systems between intercompany entities. Add further complications from the lack of standardized processes and policies across all these transactional touch points globally, and inefficiencies are everywhere — creating delays and inaccuracies throughout finance, operations, tax, treasury and all aspects of the process.

End-to-end visibility and intercompany solutions are now mission critical

As organizations tackle all of this and the scale and frequency of intercompany transactions increase, new technologies and strategic approaches can help streamline, standardize and simplify these global complexities. Through our alliance with BlackLine, the EY team is now helping leading organizations transform their intercompany processes and technologies across international supply chains for greater efficiencies and essential visibility.

Powered by BlackLine’s intercompany solution, our dedicated teams help clients achieve a faster, more accurate financial close, deploy improved governance to manage international and country-specific regulatory compliance and gain crucial visibility over every aspect and entity of their businesses. Designed to help multinationals gain control and clarity over intercompany processes, the approach can provide greater visibility and automation, free up working capital and provide other crucial benefits:

  • Transactional error mitigation — elimination of errors across thousands of transactions that can have tax and regulatory implications, starting with upstream resolution of issues
  • Improved visibility and monitoring — leading-class controls and data analytics and dashboard reporting for a true intercompany picture
  • Centralized data platform — creation of one single source of data and a global subledger for accurate, comprehensive reporting regardless of ERP system
  • Streamlined processes and policies — creating more effective intercompany operations, driving tax compliance and improvement of margins
  • Elimination of manual processes — removal of manual, error-prone processes and freeing up personnel time to work on more intuitive or high-priority tasks

Investing in the future — an inflection point for supply chains

CFOs are faced with an almost endless list of financial priorities and demands, but with continued globalization of business and the operational, regulatory and tax complexities that this creates for multinational and cross-border companies, it’s difficult to find an imperative more pressing than intercompany financial management. As supply chain operations digitize and move to cloud-based operations for greater efficiencies and agility, it’s time to make sure that the transactions inside your network are as efficient, compliant and de-risked as every external partnership and transaction.

Summary

The long-tail impact of the pandemic and ongoing supply chain disruption forced many organizations to look to third-party vendors to provide logistics workarounds. But now with mounting regulatory pressures in the United States and Europe, those same companies are turning back to intercompany transactions to help de-risk their supply chains.

About this article

By Darren Rykers

EY Global BlackLine Alliance Leader

Finance tech leader focused on finance and accounting operations and financial corporate performance management. Professional with a global mindset who drives efficiency and transparency.

Related topics Supply chain