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Are you struggling with invoicing processes that lack visibility and control across multiple locations? Do you want to streamline your accounts payable (AP) processes and automate invoicing to reduce errors and increase efficiency? If so, you need to check out the American Software case study.

The Atlanta-based company faced several challenges due to its holding company structure and lack of automation, which were compounded by the COVID-19 pandemic. However, by implementing a custom combination of KwikTag and Multi-Entity Management (MEM), American Software saved $50,000 in the first year, automated and streamlined its AP processes, and established itself as a source of truth for its accounting department.

The MEM solution allowed them to manage multiple entities across states and countries, reduce errors and time required for reconciliations, track bills and invoices more efficiently, and streamline intercompany payments. The solution was fully integrated within just 30 days, and the team could work safely from home during the pandemic, boosting morale and productivity.

You can download the case study to learn more about how American Software improved its invoicing processes, reduced errors, and increased efficiency. You will discover how the company improved internal control and credibility, simplified audits, consolidated emails related to approvals, and saved valuable time and resources.

Don’t miss the opportunity to learn how American Software overcame challenges and improved its invoicing processes with KwikTag and MEM. Download the case study today and see how you can achieve similar results for your organization!

Recent years have seen a rise in the number of transactions taking place between related companies. Intercompany accounting has become a fact of everyday business, yet, despite this, many remain unaware of the best practices for managing intercompany transactions or have a plan in place to mitigate the risks presented by some of the bigger challenges or issues that can arise when handling high volumes of transactions between related organizations.

This booklet covers the following core topics:  

Download our booklet so you can implement best practices for solving the five core challenges of intercompany transactions your team is likely to face.

Introducing our intercompany accounting solutions   

Streamline your intercompany transactions and simplify accounting across multiple entities with the power of our industry-leading solutions. Enable compliance, automate reconciliations and eliminations, and maintain a centralized source of truth between entities. If you’d like to partner with a team that will be with you every step of the way, then we’re here to help.  When we work with your company, you don’t just get a solution, we put our best people at the heart of your roadmap to success.

As you may already know, Microsoft recently introduced a new feature with the Dynamics 365 Business Central (D365 BC) 2023 release wave 1, which allows for the replication of data between companies within a single environment. While this new built-in functionality is an exciting next step for the ERP building in some of the features previously only available with our Multi-Entity Management (MEM) solution, there are still many areas where MEM will be critical to managing the complexity of multi-company accounting.

After conducting a side-by-side functionality comparison, we decided to document the functionality of both, so that partners and customers can quickly determine which tools they need to empower success for their organization. Depending on the setup’s complexity, most medium- or larger-sized companies will likely require MEM. That means you and your customers must consider the nuances of functionality needed before setting up multi-companies.

To help you understand the differences between the solutions, we’ve created a detailed comparison sheet which you can download by clicking on the links provided below:

We hope that this information helps you make an informed decision about which solution is best for your business needs. If you have any questions or want to discuss the comparison sheet further, please don’t hesitate to contact us.

As companies expand and add more entities, the complexity of their accounting processes increases, leading to the need for an overhaul of intercompany transaction processes. This may arise due to a variety of factors such as mergers and acquisitions, expansion across new geographies, or the introduction of new product lines. This growth inevitably results in a decision point: centralized vs decentralized accounts payable?

Deciding whether to centralize or keep accounting processes decentralized is a crucial decision that can impact resource allocation, vendor management, invoicing, collections, and payroll processing. It is essential to consider the increasing number of resources that come with each new entity. This includes vendors to pay, customers to invoice and collect from, and employees on the payroll.

Managing these resources can become complex and time-consuming, leading many companies to explore centralizing their payable processing. By doing so, they can avoid redundant and inefficient operations, ultimately streamlining their accounting processes.

In this blog post, we will explore the pros and cons of centralized vs decentralized accounts payable, with a focus on the benefits of streamlining operations and avoiding redundancy through centralization.

A list of topics covered in this blog, jump ahead by clicking the appropriate link:  

Let’s define what we mean by centralized and decentralized accounts payable

What is centralized accounts payable processing?

Centralized accounts payable processing refers to a method of managing accounts payable activities from a single location or team that is responsible for processing invoices, making payments to vendors, and maintaining payment records for all entities within an organization. This approach involves consolidating the accounts payable activities of various departments or locations into a single department or team, which is responsible for managing all vendor relationships, invoices, and payments for the entire organization.

In this process, all the invoices and payment requests from different departments or locations are sent to a central team for processing. The central team verifies and approves the invoices before processing the payments to the vendors. By centralizing the accounts payable processing, companies can benefit from economies of scale, reduce redundancies and errors, streamline payment processing, and gain better control over their cash flow.

What is decentralized accounts payable processing?

Decentralized accounts payable processing refers to a method of managing accounts payable activities in which different departments or locations within an organization are responsible for managing their own vendor relationships, invoices, and payments. In a decentralized accounts payable process, each department or location typically has its own accounts payable team responsible for processing invoices, making payments, and maintaining payment records.

This approach can be useful in large organizations with multiple locations or business units that have different vendor relationships and payment terms. Decentralization allows for greater autonomy and flexibility for each department or location to manage their own accounts payable activities according to their specific needs and requirements.

However, decentralized accounts payable processing can lead to inefficiencies, such as duplication of efforts and inconsistent payment processing across different departments or locations. It can also make it difficult to gain a complete and accurate view of the organization’s financial position. Therefore, some companies may choose to centralize their accounts payable activities to improve efficiency, standardize processes, and gain better control over their cash flow.


A quick overview of the pros and cons centralized accounts payable processing

The pros and cons of centralized accounts payable processing

  A breakdown of the benefits of centralized accounts processing


1. Eliminates redundant processing at separate locations

Centralizing accounts payable processes not only eliminates redundant work at separate locations but also provides additional benefits. In organizations with multiple entities operating within the same space, such as restaurant franchises or gas stations, branches within the same region may be working with the same vendors and customers.

By centralizing accounts payable processing, these entities can consolidate their vendor relationships and negotiate better pricing and terms, ultimately leading to cost savings for the organization. Additionally, centralization can provide better visibility into spending patterns and enable the organization to make more informed financial decisions.


2. Ability to negotiate better rates or prices for purchases across branches

Centralized accounts payable processes provide the ability to negotiate better rates or prices for purchases across branches. By consolidating purchasing data from all branches, the corporate head office can leverage the collective purchasing power of the organization to negotiate volume discounts and better pricing with vendors.

This can lead to significant cost savings for the organization, which can be reinvested in other areas of the business. Additionally, centralization allows for better tracking and analysis of purchasing data, which can help identify opportunities for further cost savings and process improvements.


3. Introduce consistency across records and accounting errors and duplications

Centralizing accounts payable processes not only presents an opportunity for cost reduction but also ensures consistency in recordkeeping and coordination throughout the entire process. By having a centralized system, companies can reduce the risk of errors and duplications by having a single source of truth for all accounts payable data.

Moreover, a centralized system allows for better coordination and training of staff members, ensuring that everyone operates in a similar manner and adheres to standardized processes. This can help reduce redundancies, disagreements, and errors across different departments or locations, leading to greater efficiency and accuracy in accounts payable management.


4. Lower the risk of missed payments with consolidated invoicing

Centralized accounts payable processes can lower the risk of missed payments by using consolidated invoicing. When vendors work with customers who have a centralized payables department, they can submit all invoices to a single location, which reduces the likelihood of invoices being lost or overlooked. This centralized approach provides vendors with greater confidence that their invoices will be processed in a timely and accurate manner.

Additionally, consolidated invoicing can simplify the payment process for both the customer and the vendor, as it reduces the need for multiple payments to be processed across different locations or departments. This results in a more streamlined and efficient accounts payable process for all parties involved.

5. Provides better visibility into spending patterns and enables informed financial decisions

By consolidating accounts payable data from across an organization, companies can gain a comprehensive view of their spending patterns, including how much they spend on different vendors and types of purchases. This information can be used to identify opportunities for cost savings, negotiate better pricing with vendors, and make informed financial decisions.

Additionally, centralizing accounts payable processing allows for better tracking and analysis of financial data, which can help identify areas of overspending or inefficiencies in the process. Overall, centralization provides companies with the data and insights they need to make informed financial decisions that support their long-term growth and success.


6. Reduces manual labour and streamlines processes

Centralized accounts payable processing can help reduce manual labour and streamline processes by automating tasks such as invoice data entry and approval workflows. By using electronic invoicing and approval systems, manual data entry and paper-based processes can be eliminated, reducing the time and effort required to process invoices.

In addition, automation can help reduce errors and improve accuracy by minimizing the need for manual intervention. This streamlined approach can free up staff time to focus on more value-added activities, such as strategic financial analysis, and enable the organization to operate more efficiently overall.


7. Enables easier tracking and analysis of data for decision making

Centralized accounts payable processing provides organizations with easier tracking and analysis of data, allowing for better decision-making. By consolidating data from multiple locations or entities, a centralized system can provide a comprehensive view of the organization’s spending patterns and trends.

This can help identify areas where cost savings can be achieved or where the organization may be overspending. With easy access to this data, organizations can make informed financial decisions and implement changes to improve their bottom line. Additionally, a centralized system can provide real-time reporting and analytics, allowing for more accurate and up-to-date information for decision-making.

8. Enhances financial control and compliance

Centralized accounts payable processing enhances financial control and compliance by creating a standardized process that ensures all transactions are properly authorized and documented. This helps to prevent fraud and ensures that the organization remains compliant with relevant regulations and internal policies.

Additionally, centralized processing enables more efficient monitoring of financial activities, which can help detect and prevent any irregularities or errors before they become larger issues. With a centralized system, auditors can easily access all necessary records and data to conduct audits and ensure compliance with regulations. Ultimately, enhanced financial control and compliance can help to protect the organization’s reputation, increase stakeholder trust, and mitigate potential risks.

9. Improves vendor and customer relationships

Centralized accounts payable processing can also improve vendor and customer relationships. By having a centralized system, vendors can receive consistent communication and payment terms, which can lead to greater trust and reliability in the business relationship. Additionally, customers can receive more accurate and timely invoices, leading to better payment management and improved vendor relationships.

With a centralized accounts payable system, both vendors and customers can benefit from greater transparency, better tracking of transactions, and more efficient communication, ultimately leading to stronger business relationships and increased satisfaction. This can help organizations build a positive reputation in their industry and attract more business in the long term.

The potential challenges of centralized accounts payable processing


1. Requires significant initial investment

Implementing a centralized accounts payable system requires a significant initial investment in technology, personnel, and training. The cost of purchasing and implementing new software and hardware, along with the cost of training staff on the new system, can be substantial. Additionally, there may be a need to hire additional personnel to manage the new system, and this can add to the overall cost.

However, despite the initial investment, centralizing accounts payable can lead to long-term cost savings through increased efficiency, reduced errors and redundancies, and better negotiation with vendors. Organizations must carefully weigh the costs and benefits of centralization before making a decision.


2. Loss of local control, as decisions related may be made at the corporate level

Centralized accounts payable processing can result in a loss of local control since decisions related to accounts payable may be made at the corporate level rather than at individual branches or locations. In a decentralized system, local branches or departments have more autonomy in decision-making related to accounts payable, such as selecting vendors and negotiating terms.

However, in a centralized system, these decisions are typically made at the corporate level, which can result in a loss of flexibility and local control. This can be a disadvantage for organizations that require a more localized approach to their accounts payable processes. To mitigate this risk, it is important for companies to establish clear communication and collaboration between corporate and local branches to ensure that decisions are made in the best interest of the organization as a whole.


3. Communication and coordination can be challenging during transition

The implementation of a centralized accounts payable process can be a complex undertaking that requires effective communication and coordination between different departments and locations. During the transition, there may be challenges in ensuring that all stakeholders are aware of the new processes and procedures.

There may also be some resistance to change from employees who are used to working in a decentralized system. To mitigate these challenges, it is important to have a clear communication plan in place that outlines the benefits of centralization and provides regular updates on the progress of the transition. Additionally, providing adequate training and support to employees can help ensure a smoother transition to the new system.


4. Risk of data breaches if centralized system does not have advanced security settings

One potential downside of centralized accounts payable processing is the risk of data breaches if the centralized system does not have advanced security settings in place. With all financial data consolidated in a single location, the consequences of a security breach could be significant, leading to loss of sensitive data, financial loss, and reputational damage for the organization.

To minimize the risk of data breaches, it is important to implement robust security measures such as encryption, access controls, and regular system updates. Additionally, staff members should be trained on best practices for data security to ensure that all individuals with access to the system are aware of the risks and are taking appropriate precautions to safeguard sensitive data.

5. May limit the ability of individual branches to tailor processes to their specific needs

One potential drawback of centralized accounts payable processing is that it may limit the ability of individual branches or locations to tailor their processes to their specific needs. With a centralized system, decisions related to accounts payable may be made at the corporate level, and there may be less room for local customization.

This can be particularly challenging for organizations with unique processes or requirements that are specific to a particular location or business unit. However, many centralized accounts payable systems offer a certain degree of flexibility, and organizations can work to strike a balance between centralization and customization to meet their specific needs.


6. Increased reliance on technology can be a disadvantage if there are technical issues or system failures

Centralized accounts payable processing relies heavily on technology, which can be a disadvantage if there are technical issues or system failures. In such instances, delays can occur, and the process can come to a halt until the issue is resolved. Technical difficulties can also lead to the loss of data, which can be a significant setback.

Therefore, it is crucial to have a robust and reliable system in place, as well as backup procedures and disaster recovery plans, to mitigate the risk of system failures. Additionally, proper training and support for employees who use the system are essential to ensure that they are equipped with the knowledge and skills to manage any technical challenges that may arise.


A quick overview of the pros and cons  of decentralized accounts payable processing

The pros and cons of decentralized accounts payable processing

  The benefits of decentralized accounts processing

1. Operating in multiple countries may be easier if decentralized

Decentralized accounts payable processing can make operating in multiple countries easier. This is because companies that operate in different countries may find that separate entities have different standards or needs, making it challenging to manage a centralized system. Decentralization allows each entity to manage its own accounts payable processes, which can help ensure that each location adheres to local laws and regulations.

Additionally, it can provide greater flexibility to respond to local market conditions and can help reduce the administrative burden on the central finance team. By allowing each location to tailor its processes to its specific needs, companies can improve the efficiency of their accounts payable processes and improve overall financial management.

2.Different countries may require different levels of security

Having different levels of security requirements in different countries can be a challenge for a centralized accounts payable processing system. However, a decentralized system can be more flexible and responsive to the specific security needs of each country. For example, a country with high levels of cyber-attacks may require more advanced security measures, while a country with lower security risks may only require standard security measures.

By allowing each country to manage their own accounts payable processes and security measures, a decentralized system can provide a tailored approach that meets the specific needs of each location, ensuring compliance with local regulations and minimizing the risk of security breaches.


3. Parent companies may require each child company to self-manage

In a decentralized accounts payable processing system, each child company or subsidiary is responsible for managing its own accounts payable processes. This can be a benefit in cases where the parent company wants to empower each child company to make decisions about their own financial management.

By allowing individual entities to manage their own accounts payable processes, they have greater control and flexibility over their finances. This can help to foster a sense of autonomy and ownership among subsidiary companies, which can be beneficial for their overall performance and productivity. Additionally, it can reduce the workload on the parent company, as they do not have to manage every aspect of the accounts payable process for each subsidiary.

4. Decentralization allows for greater flexibility in tailoring processes to local needs

Decentralized accounts payable processing allows greater flexibility in tailoring processes to local needs because each branch or subsidiary can develop processes and procedures that best suit its specific requirements. This is particularly important when operating in different regions with unique regulations, cultures, and business practices.

With decentralized AP processes, each location has more control over how they handle their financial operations and can adjust accordingly. This approach also allows for faster decision-making and problem-solving since the local team has a better understanding of the specific challenges and opportunities in their region. By tailoring processes to local needs, companies can improve efficiency and minimize disruptions while maintaining a standardized overall approach.


5. Each entity can make decisions independently without needing to consult with a central authority

The decentralized accounts payable processing allows each entity or location to have autonomy in decision-making related to financial processes. This means that there is no need for a central authority to make decisions for every location. Each entity can have its own decision-making process and can customize its processes to meet its specific needs.

For example, a location in a remote area with limited access to technology may have different accounts payable processes than a location in a more urban area. The flexibility to tailor processes to local needs can result in more efficient and effective financial operations for each entity.

6. Decentralized systems may be easier and quicker to implement

Decentralized systems may be easier and quicker to implement compared to centralized systems, as each entity can set up its own accounts payable process. The local team can work within their own timelines and resources to establish and manage their own systems, without the need to wait for approvals or support from a central authority.

This allows for faster decision-making and implementation, which can be particularly important for businesses that need to respond quickly to market changes or regulatory requirements. Additionally, since each entity has its own process, it may be easier to troubleshoot and resolve issues quickly, without requiring the involvement of a central authority.


7. Can result in greater employee autonomy and job satisfaction

Decentralized accounts payable processing may result in greater employee autonomy and job satisfaction because it allows for more decision-making power to be distributed among the local teams. With a decentralized approach, employees at the local level have more autonomy and responsibility in making financial decisions that affect their day-to-day work.

This can lead to a greater sense of ownership and pride in their work, as well as increased job satisfaction. Additionally, employees may feel more empowered to innovate and improve processes since they have greater flexibility to tailor processes to their specific needs. Ultimately, this can result in a more engaged and motivated workforce.

8.  Can promote innovation and idea generation at the local level

Decentralized accounts payable processing can promote innovation and idea generation at the local level by allowing local employees to have a greater say in the processes and procedures that they use on a daily basis. When employees are given the freedom to make decisions and suggest improvements, they are more likely to feel invested in the success of the company and its processes. This can lead to increased job satisfaction, motivation, and productivity.

Additionally, local employees may have a better understanding of the specific needs and challenges of their location, which can lead to more tailored solutions and innovations that benefit the entire organization. Overall, a decentralized approach can encourage a culture of innovation and continuous improvement, which can help the company stay competitive and adapt to changing market conditions.


9. Reduces the risk of a single point of failure in the system

Decentralized accounts payable processing can help reduce the risk of a single point of failure in the system. In a centralized system, if there is a technical issue or system failure, the entire payment process can come to a halt, resulting in significant disruptions to the business.

However, with a decentralized system, if one entity experiences an issue, the impact is limited to that entity, and the rest of the system can continue to function. This can help ensure that business operations are not significantly impacted by system failures or other disruptions, reducing risk and enhancing business continuity.


The challenges of decentralized accounts payable processing

1. Limited visibility and control over spending patterns

One of the challenges of decentralized accounts payable processes is limited visibility and control over spending patterns. With separate entities managing their own payments, it can be difficult to get a clear overview of how money is being spent across the organization. This can make it harder to identify potential issues or areas for improvement, and can also lead to inconsistencies in spending practices.

Without a centralized system for monitoring spending, it can be challenging to enforce spending policies or ensure that all departments are adhering to the same standards. This lack of visibility and control can ultimately impact the overall financial health of the organization.

2. Inefficiencies due to duplication of effort and inconsistent processes

Decentralized accounts payable processes can lead to inefficiencies because each branch or entity may have its own processes and procedures for handling invoices and payments. This can result in duplication of effort and inconsistent processes, which can lead to errors, delays, and ultimately, increased costs. Additionally, without a centralized system for tracking and monitoring payments, it can be difficult for the organization to gain visibility into its spending patterns and identify areas for improvement.

The lack of standardization and consistency can also make it challenging to implement best practices and ensure compliance with regulatory requirements. Therefore, it’s essential to ensure that proper communication and collaboration channels are established, and standardized processes are in place, even in a decentralized system, to minimize inefficiencies and ensure consistency across the organization.

3. Difficulty in consolidating financial information across multiple entities

Decentralized accounts payable processing can lead to difficulty in consolidating financial information across multiple entities. With each entity having its own processes and systems, it can be challenging to obtain and aggregate financial data from various sources. This can lead to delays in reporting, inaccurate financial information, and difficulty in making informed decisions based on the consolidated financial data.

It also poses a challenge for auditors as they have to work with multiple sets of financial data to ensure compliance and accuracy. Without a centralized system, it may require significant effort and time to collect and consolidate financial data from multiple sources.

4. Increased risk of errors, fraud, and compliance issues

Decentralized accounts payable processes can increase the risk of errors, fraud, and compliance issues. When each entity or branch manages its own accounts payable, it can be challenging to ensure consistent processes and procedures are followed. This can lead to errors in data entry, duplicate payments, or missed payments, which can cause financial losses and affect business relationships with vendors.

Additionally, it can be harder to detect and prevent fraud, such as fake invoices or payments to fictitious vendors, since there is less oversight and control over the entire process. Compliance with financial regulations and company policies can also be more difficult to ensure, leading to potential legal and financial consequences.

5. Lack of standardization in processes and systems

Decentralized accounts payable processing can lead to a lack of standardization in processes and systems, which can be a significant challenge for organizations. Without centralized oversight, individual entities or branches may develop their processes and systems that work best for them, leading to a lack of consistency across the organization. This can cause confusion, delays, and errors when trying to consolidate financial information or compare data between different entities.

It can also make it challenging to implement standard policies and procedures, train employees, or identify areas for improvement. Standardization is essential to maintaining efficiency and accuracy in financial processes, and the lack of it can be a significant disadvantage of decentralized accounts payable processing.

6. Difficulty in managing vendor and customer relationships

In a decentralized accounts payable process, each entity may manage its own vendor and customer relationships. This can lead to difficulties in maintaining consistency and standardization in communication and processes with these stakeholders. For example, different entities may negotiate different terms with the same vendor, resulting in varying pricing and payment schedules. This can lead to confusion and potentially strain relationships with vendors or customers. Additionally, it can be challenging for a central authority to effectively manage and maintain these relationships if each entity has its own unique approach.

7. Limited ability to leverage technology and automation

In decentralized accounts payable processes, each entity may have its own technology solutions or systems in place, making it challenging to leverage technology and automation across the organization. This can result in manual and time-consuming processes, which can increase the risk of errors and decrease efficiency.

For example, if each entity is using a different accounting software or payment processing system, it may be difficult to integrate these systems and automate processes such as invoice processing or payment approvals. This can lead to delays and errors, as well as a lack of visibility and control over the overall accounts payable process. In contrast, a centralized accounts payable system allows for greater standardization and the ability to leverage technology and automation for increased efficiency and accuracy.

8. Increased administrative burden

Decentralized accounts payable processes may result in an increased administrative burden due to the need to manage multiple processes and systems. With multiple entities managing their own accounts payable, there may be a greater need for oversight and coordination, which can require additional resources and time. This can lead to increased costs and reduced efficiency in the overall accounts payable process.

Additionally, the decentralized approach may require additional training and support for employees who are managing their own accounts payable processes. This can further add to the administrative burden and costs associated with the decentralized approach.

9. Inability to take advantage of economies of scale

Decentralized accounts payable processes can make it difficult for organizations to take advantage of economies of scale, which is the concept of achieving cost efficiencies by increasing the volume of production. When processes and systems are decentralized, each entity may be responsible for handling its own payments, which can result in smaller transaction volumes.

As a result, organizations may be unable to negotiate lower prices with vendors due to reduced purchasing power. Additionally, the cost of implementing and maintaining separate systems across multiple entities can be higher than that of a centralized system. This increased administrative burden can ultimately lead to higher costs for the organization.

  Introducing centralized accounting Payable solutions that integrates with Dynamic 365

Multi-Entity Management is a centralized solution that works with multiple partners for Dynamics 365 solutions to connect accounts payable processing across multiple entities. This solution allows organizations to manage their financial transactions and accounting processes across multiple legal entities, with the added benefit of automating and streamlining these processes.

With Multi-Entity Management, organizations can simplify their accounts payable process, reduce errors, and gain greater visibility and control over their financial operations. Additionally, this solution integrates seamlessly with other Dynamics 365 applications, providing a comprehensive solution for managing all financial aspects of an organization.

Learn more about Multi-Entity Management


Every day, companies make decisions based on the data they collect. Most of us have a sea of data at our fingertips—whether we need customer information, transaction data, or marketing metrics, the likelihood is a wealth of data is available. So why then do so many companies struggle to use data effectively?

One of the significant challenges of financial consolidation is understanding whether or not the data is trustworthy and can be relied on to make critical decisions—a challenge that is particularly relevant for companies scaling quickly and adding multiple entities.

A study by Gartner found that poor quality data costs the average organization $9.7 million a year and the U.S. economy $3.1 trillion annually. This blog explores why poor data management ends up costing multi-companies, and the most effective solutions for data management strategy in financial consolidations.


Why does poor data management cost multi-companies so much?

Data is central to how we do business, yet many can fail to consider its effective management. Often, information is sourced from so many disparate systems that it can be impossible to consolidate it or obtain a single source of truth.

The situation is further complicated as companies acquire new entities and scale operations. Often the amount of data to manage escalates considerably and ends up being mishandled without suitable systems and best practices in financial consolidation in place.

For instance—in the case of mergers and acquisitions—it’s common to see bottlenecks arise due to crucial data being pulled from incompatible systems and manually inputted to a parent system. This sort of process results in data riddled with errors as a result.

Data management is crucial to your company’s success, particularly when it comes to the sensitive financial information required for financial consolidations. Companies simply cannot afford the risk of poor data management. It can lead to significant bottlenecks, stressed accounting teams trying to align various financial reports, and non-compliance with government fines resulting in hefty fines (to name just a few of the ramifications).

Financial consolidation pillar pagei

1. Audit your current data and systems to identify areas for improvement

Poor data management is possible to fix. Often it will require your company as a whole to look for ways to align various entities and subsidiaries to ensure that financial consolidation is possible. It’s easy to identify where issues with data management arise. To build an effective data management strategy, you will need to audit your current data first, then make sure all new information meets the seven standards of reliable data:

Further reading: 4 ways ERPs simplify financial consolidation for multi companies 


2. Develop standardized data management policies across all entities

Having a well-structured framework for data management for financial consolidations makes it easier to identify and rectify issues early on. To gain better insights, your business needs to have clear workflows outlining how to manage data for each of the five steps in data analysis: data definition, collection, cleaning, analysis, and application. By implementing consistent policies across all entities, your company can avoid much of the confusion that often follows a major shift in intercompany financial management, like a merger or acquisition.

If you’ve realized that you’ll need to revamp your finance department’s entire approach to data management or want to build a customized strategy from scratch, we recommend reading our blog covering ten best practices in data management for finance teams.

Further reading: Financial consolidations for multi-companies (FAQs answered) 


3. Update security protocols to address data management for financial consolidation

Poor data management can cause significant security concerns for companies consolidating financials. Transferring data between various entities and systems can weaken security measures and introduce the risk of data breaches. If you’re interested in learning more about the security issues that multi-companies face—particularly mergers and acquisitions—you should check out our blog on the four common security issues they face.

Companies must be vigilant when consolidating data from various entities, often leaving sensitive information vulnerable to cyber-attacks if data is transferred between multiple databases. With stories of data breaches and their significant penalties making headlines, no company is immune to the risk posed by cyber threats. That’s why businesses must prioritize scalable security tools that offer impenetrable encryption and support secure sharing. Be on the lookout for the following features:

It’s also a good idea to provide security awareness training sessions twice a year to encourage your team to stay vigilant and updating on the latest phishing tactics.


4. Stay up to date with compliance and data protection regulations

Establishing a culture of compliance within your organization is vital to safeguarding your data. You must not only remain updated on the latest changes to accounting standards like ASC 810 or IFRS 10, but you must also comply with any industry- or region- specific data protection regulations. Consult your risk and security officers about new technologies that feature autonomous data capabilities. While no software can guarantee compliance, automation can greatly improve data accuracy and augment your team’s productivity. Additionally, your policies should complement your technologies to create sustainable workflows.

5. Leverage automation to accelerate intercompany transaction processing

Your finance team can significantly reduce reporting errors by automating intercompany transaction processes, like matching, reporting, and eliminations. When done manually using spreadsheets, these tasks are time-consuming and lack proper data control, leading to errors that may only surface during the final stages of financial consolidation. Rectifying such errors can be burdensome and may require sifting through a large volume of data to find even a single mistake. Automating these processes saves time and reduces the need for triple-checking data integrity, empowering your team to master intercompany transactions.

Further reading: A comprehensive guide to intercompany reconciliation 

6. Invest in an integrated, aligned, and centralized solution

A study by Bloomberg found that over 40 percent of respondents expected centralized, cloud-based technologies to be one of the most significant drivers of change in data management. By opting for centralized data management, you accelerate financial consolidations and decision-making processes, aligning all entities in a single database.

However, not all solutions are created equal. To set your team up for success, you need to start researching as soon as possible and have a plan in place for post-merger ERP integration. When investing in new software, you must prioritize the following six essential financial consolidation features:

6 essential features of financial consolidation software:  


starboard group case study financial consolidation multi-company

Binary Stream announced it has partnered with Avalara, a leading provider of tax compliance automation software for businesses of all sizes.

Binary Stream is now part of Avalara’s “Certified for AvaTax” program, which features integrations that perform at the highest level, providing the best possible customer experience. As a result of this partnership, Binary Stream’s customers can now choose Avalara’s AvaTax to deliver sales and use tax calculations within Multi-Entity Management — in real time.

Khaled Nassra, Head of Marketing at Binary Stream, explained the importance of using this partnership to empower more multi-entities to streamline their finances through effective intercompany automation.

“Streamlining intercompany accounting processes has always been at the core of what we do here at Binary Stream, so we’re partnering with Avalara to combine our collective experience and enable multi-entities to automate taxes and intercompany transactions from within Dynamics 365 Business Central.”

Marshal Kushniruk, Executive Vice President of Global Partners at Avalara said, “Binary Stream understands the needs of its customers, and Multi-Entity Management reduces complexity for their customers in many ways. We understand that digitization of business processes is not an option, it is essential; we are proud to offer fast, accurate, and easy tax compliance solutions to our shared customers.”

Binary Stream is now an Avalara Certified partner. Certified partners pass a series of criteria developed by Avalara to help ensure the connector’s performance and reliability, thereby helping mutual customers benefit from a seamless experience with Avalara’s tax compliance solutions.

About Avalara, Inc. 

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Intercompany financial management (IFM) refers to the practice of organizing, authorizing, and handling financial processes that occur between a corporation’s legal entities. These activities include intercompany transactions, accounting, tax, policies, etc. The main goal of IFM is to support the achievement of business objectives by improving productivity and accuracy, ensuring compliance with tax and regulatory standards.

As companies grow, smooth and efficient intercompany processes are essential. Unfortunately, a recent survey conducted by Dimensional Research found that 96% of respondents encountered challenges with intercompany activities and 99% agree that intercompany processes are becoming increasingly complex and challenging. Without a solution in place, poor IFM can negatively impact business outcomes, resulting in huge time-wastes manually correcting errors and costly penalties from non-compliance. Continue reading for five tips to streamline your intercompany financial management.


Tip #1 | Foster clear internal communication around shared responsibility

Lack of ownership combined with a perceived lack of importance is one of the key barriers to efficient intercompany financial management. According to Deloitte’s Intercompany Accounting and Process Management Survey, 50% of respondents identified a lack of defined ownership of intercompany processes, resulting in poor financial visibility. Often companies assume that the finance department will handle it; however, intercompany processes are a shared responsibility that require a holistic approach.

Clear communication that establishes roles and manages expectations is vital to overcoming this barrier. Enacting global accounting policies and implementing an intercompany accounting framework are two best practices for intercompany transactions that can provide a consistent structure for your team to follow.


Tip #2 | Increase cash liquidity with automation

Cash liquidity is a vital component of a business’ survivability and profitability. Maintaining an appropriate balance empowers leadership to acquire necessities, secure new financing, and deploy funding—bolstering expansion initiatives.

The previously mentioned survey by Deloitte also found that 54% of respondents rely on manual intercompany processing and struggle with limited counterparty visibility to support reconciliation and elimination. Without at least partial automation to augment human productivity, companies often suffer from bottlenecks and poor cash flow. That’s why many companies are investing in automation to solve intercompany challenges.


Tip #3 | Don’t lose financial visibility, gain granular insights

Many businesses choose to pay intercompany charges in lump sum amounts due to difficulties in manually applying the correct classification and breakdown of expenses, but this is a bad habit that must be addressed. Over-simplification can skew your financial data, weakening the credibility of your analyses and making it difficult to defend your intercompany prices to authorities. You also lose clarity when forecasting or determining whether the company met performance targets.

Suitable ERP software with multiple element revenue allocation functionality will help you maintain a well-defined database that enables your finance team to dig into the nitty-gritty. Proper allocations and reporting provide leadership with valuable information and enable complete insight into historical transactions.

Further reading: Financial consolidations for multi-companies (FAQs answered) 


Tip # 4 | Pay close attention to tax and compliance

Tax risks and considerations have a huge impact on financial performance and strategy. An issue that is only compounded if your company operates in multiple regions or participates in a supply chain that collects sales tax, use tax, and exemption certificates. It’s vital that your company adheres to each jurisdiction’s tax requirements and applies the correct treatments.

In recent years, tax authorities have implemented stricter auditing protocols, demanding more granular and up-to-date intercompany transactions. However, these changes have highlighted a deficit in many businesses with poor IFM. Companies reliant on manual tax processes open themselves to noncompliance and increased financial risk. Automated tax management can help finance teams take back control over their intercompany accounting processes.


Tip # 5 | Prioritize systems integration and alignment

IFM entails handling an overwhelming number of intercompany transactions as efficiently as possible. If a business relies on decentralized systems or unintegrated ERPs, inefficiencies arise and trigger reporting setbacks. When finance is bogged down with reconciliations and eliminations, a butterfly effect can be felt across the entire company, ultimately slowing down high-level business decisions.

Investing in integrated and aligned solutions frees up your accounting department to focus on more strategic tasks. Multi-Entity Management embeds directly in Microsoft Dynamics 365 Business Central and Dynamics GP to streamline intercompany transactions, completing the entire process within a single instance.


Signature HealthCARE saves $120,000 a year while scaling from 55 to 239 entities

Intercompany reconciliations can be a major source of stress for accounting teams working with numerous entities. It doesn’t matter if you’re the parent company or the subsidiary. Reconciling a high volume of transactions every month can lead to administrative headaches and bottlenecks that leave your accounting team frustrated and struggling to update systems so that records are accurate across all entities.

Explore everything you need to know about intercompany reconciliations, from defining what they are to walking you through the benefits and challenges; there are helpful tips here for any company struggling to streamline this process.

Your FAQs about intercompany reconciliations answered

If you have a specific area of interest, click the relevant question below.


What is intercompany reconciliation?

Intercompany reconciliation is the process of verifying transactions between separate entities of the same parent company. These transactions are referred to as intercompany transactions. Reconciliation is a process relevant to many companies. An entity refers to any divisions, subsidiaries, units, or franchises that come under the ownership of a parent company.

Intercompany reconciliation must take place to ensure that consolidated financial statements and data are accurate. It involves confirming that the transaction amount is recorded correctly by both the parent company and the entity and then eliminating it from closing statements.


What are some types of intercompany reconciliation?

The three different types of intercompany reconciliation are directly aligned with the three types of intercompany transactions. Below is an example of each one.


What are intercompany payables and receivables?

Reconciliations do not just apply to the straightforward exchange of products, and it’s essential to understand that they must be performed on all intercompany payables and receivables. These can include the exchange of labour, products, or raw materials.


What is an example of intercompany reconciliation?

There are numerous examples of intercompany reconciliations, and depending on the type of transaction, the action required will vary. Let’s look at one of the most common types:

If both the parent company and the subsidiary record these steps appropriately, the transactions will cancel each other out, and they will successfully complete the reconciliation.


How do intercompany reconciliations work?


Intercompany reconciliations work when there are clear processes around managing transactions and companies have the necessary access to timely and accurate data from other entities.

One of the challenges when handling intercompany transactions is when teams assume they can manage the workload in spreadsheets or separate accounting solutions by manually inputting data. This can lead to cumbersome manual work (e.g., downloading and uploading different files and reports, trying to move information from one accounting system into another, cross-referencing and double-checking for the most recent version of files, struggling to keep up with emails from various entities) and can put both teams under administrative strain.

Reconciliations are best performed in an accounting solution where all entities have access to the data they need in a streamlined, centralized environment. It’s possible to invest in solutions that have advanced security, allowing subsidiaries access to only the information they need while granting parent companies enough access to complete reconciliations and eliminations accurately.

It’s best to perform reconciliations on an ongoing basis, as it can be hard to keep track when teams only check intercompany transactions every month or so. It’s easy for people to forget the details of particular transactions, and it can become increasingly more difficult o resolve errors. If teams have the capacity, this task should be performed on a weekly, if not daily, basis. Many companies invest in an automated solution as the volume of these transactions grows as it can become impossible to keep up.

Even when companies don’t have the means to invest in a centralized solution, they should take the time to roll out global accounting policies to help all entities report in a way that will enable compliance with accounting standards. These policies should include everything from naming conventions to workflow standardization. Setting expectations makes it easier to align data and reconcile transactions between entities.

Automate transactions | financial consolidation guide

What are the benefits of intercompany reconciliations?

Without automation, reconciliations can be time-consuming, with few benefits outside of remaining compliant with global accounting practices. However, when reconciliations are automated effectively, the process has many benefits. Here’s a handful:


What are the challenges of intercompany reconciliations?

When intercompany reconciliations are not streamlined or automated, they can present a number of challenges. Here are a few:


How can you improve intercompany reconciliations?

There are a number of steps you can take to streamline and automate intercompany reconciliations and ensure your finance team doesn’t struggle to keep up.


Automate, automate, automate | Wherever possible, teams need to eliminate bottlenecks by identifying time-consuming processes and looking to automate and streamline these areas. Investing in a solution built to handle the complexity of intercompany reconciliations will be key to boosting efficiency and improving intercompany reconciliations.


Centralize financial data across entities | A centralized solution can collectively save your entities months of work per year. By giving entities easy access to the information they need, you eliminate the back-and-forth of countless emails. Don’t let reports or records end up stranded on one person’s computer, ensure there’s an environment where anyone can gain secure access to the critical information they need to do their job.

Embrace continuous close | Rather than postponing reconciliations to the end of the month (which can lead to overwhelm), teams should constantly track and reconcile intercompany transactions. Automating this process is possible, so your system continually flags errors, mistakes, or potential fraud.


Signature HealthCARE saves $120,000 a year while scaling from 55 to 239 entities


ASC 810 is a US GAAP accounting standard set by the Financial Accounting Standards Board (FASB), providing guidance for companies with multiple entities to remain compliant when consolidating their financials. It’s similar to IFRS 10, the standard implemented by the International Accounting Standards Board (IASB), but differs in some key areas. Whether your company is merging with another, acquiring a smaller company or expanding into new territories, it’s critical that your team is fully aware of the guidelines set out under this standard.

This blog offers an introduction to ASC 810 to help your team better understand the complexities introduced by the accounting standard and gain insight into how to maintain compliance when preparing consolidated financial statements. If you have more general questions or need a refresher on the topic, check out our complete guide to financial consolidation before you continue reading this blog.

The objective of ASC 810 for consolidated financial statements

The purpose of consolidated financial statements is to present, primarily for the benefit of the owners and creditors or the parent, the results of operations and the financial position of a parent and all its subsidiaries as if the consolidated group were a single economic entity. There is a presumption that consolidated financial statements are more meaningful than separate financial statements and that they are usually necessary for a fair presentation when one of the entities in the consolidated group directly or indirectly has a controlling financial interest in the other entities. (810-10-10-1).

Percentage ownership is secondary to economic power

In the past, determining the parent entity after a merger or acquisition often came down to percentage ownership. In an effort to address the growing number of variations in multi-entity business structures, FASB issued FIN 46R, which introduced the concept of “control exercised through economic power”. This concept means that ownership percentage is secondary to an entity’s ability to influence decision-making and financial results through contractual rights and obligations and risk exposure.

The consolidation evaluation process under ASC 810 incorporates this principle from FIN 46R. Today, companies can determine the parent entity by evaluating ownership percentage as long as the entity in question does not meet the criteria to be considered a “variable interest entity” or VIE.

Be vigilant in assessing entities for economic power

When evaluating each subsidiary or entity for consolidation, you must familiarize yourself with two key models introduced by ASC 810: the Variable Interest Entity (VIE) Model and the Voting Interest Model (VIM). Under the VIE model, a controlling financial interest in a VIE exists if the reporting entity has both:

  1. The power to direct the activities of the VIE that most significantly impact the VIE’s economic performance.
  2. The obligation to absorb the losses or the rights to receive benefits that could be significant to the VIE.

Under the VIM, the reporting entity displays a controlling financial interest if it possesses a majority voting interest in another entity. Depending on certain circumstances, like contractual provisions or agreements between shareholders, the power to control may exist even when one entity holds less than 50% voting interest.

Determining whether to use the VIE model or VIM

To properly determine whether an entity meets the requirements for consolidation under the VIE model or VIM, the following are some of the questions that should be asked about each entity:

Is it a legal entity?

Some of the criteria that can help you determine if an entity is a legal entity are as follows:

Does it meet the definition of a business under ASC 805?

ASC 805 defines a business as: “An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members or participants.” (805-10-55-3A).

Does the entity hold a variable interest?

A variable interest is defined as any interest or combination of interests that absorbs an entity’s variability. Although there is no specific list that outlines all variable interests, they are often assets such as receivables, leases, economic benefits, performance obligations, loans, or even an exercisable right to purchase an asset at a fixed rate.

Assessing entities under ASC 810 for financial consolidation

Familiarize yourself with the decision tree for the Variable Interest Entity Model

When applying the Variable Interest Entity Model, an entity is likely a VIE if it satisfies the following conditions:

However, the most helpful resource for companies trying to decide whether they should consolidate under ASC 810 is the VIE model decision tree pictured in the image below.

ASC 810 decision tree for the Variable Interest Model



Entities that consolidate under the Voting Interest Model (VIM)

The Voting Interest Model (VIM) is a much simpler model that is familiar to most accounting teams. If a company does not meet the requirements to consolidate under the VIE model, it must look at the VIM. Put simply, this model requires that a company consolidates an entity if it owns the majority of that entity, i.e., over 50%.

ASC 810 decision tree for the Voting Interest Model

New guidance on limited partnerships

Under previous guidance, the general partner would consolidate most limited partnerships. While most limited partnerships were not considered VIEs, in cases where they did qualify, the general partner would often be regarded as the primary beneficiary and be required to consolidate the limited partnership anyways.

With the most recent amendments to ASC 810, general partners must follow the new guidance and likely will no longer need to consolidate limited partnerships. This makes sense as the general partner typically does not truly have control and often acts as a service provider for the other partners. Nevertheless, general partners must provide more extensive disclosures in their financial statements, as most limited partnerships are now considered VIEs under the new guidance (810-10-15-14).

Choose accounting software built to handle the complexities of ASC 810

When it comes to compliance for financial consolidation, most companies will face a few challenges. You must invest in software that can appropriately meet the demands of accounting for multiple entities under GAAP regulations. Why not check out Multi-Entity Management, a solution built to help your company simplify processes and streamline financial consolidations.

starboard group case study financial consolidation multi-company

IFRS 10 is an accounting standard set by the International Accounting Standards Board (IASB), providing guidance for companies with multiple entities to remain compliant when consolidating their financials. It’s similar to ASC 810 (the US GAAP accounting standard for financial consolidation) but differs in some key areas. Although, it’s important to note that both will usually result in the same conclusions.

Companies that need to prepare financial statements under IFRS rules must pay close attention to the guidelines set out under IFRS 10. This blog serves as an aid for your team to understand the complexities introduced by the accounting standard.

If you have more general questions or need a refresher on the topic, check out our complete guide to financial consolidation before you continue reading this blog.

The objectives of IFRS 10 for consolidated financial statements

When it comes to IFRS 10, it’s best first to understand the objectives set out under the accounting standard. Put simply, IFRS 10 establishes principles for presenting and preparing consolidated financial statements when an entity controls one or more other entities.

Here are the key objectives of IFRS 10

Financial consolidation is based on identifying control

If you’re consolidating financial statements under IFRS 10, then the model is based on an investor’s control of an investee. Control is defined in the IFRS guidelines as follows, “An investor controls an entity when it is exposed, or has rights to variable returns with its involvement with the investee and has the ability to affect those returns through its power over the investee.”

Therefore, to control an entity, the investor must possess all three of the following elements:

How to identify control under IFRS 10

Assessing whether an investor has power over an entity

When a company is trying to identify which entities have control, they should consider each entity’s rights. Power usually arises from an entity’s rights, such as voting rights, the right to appoint key personnel, the right to decisions within a management contract, and removal rights.

An investor without a majority of voting rights may still possess sufficient substantive rights that grant it power (i.e. de facto power). While substantive rights relate to the practical ability to direct relevant activities, protective rights relate to fundamental changes to the activities of the entity or apply in exceptional circumstances. It’s important to note that protective rights do not result in power or control.

IFRS 10 power continuum for assessing whether an investor has power

When determining if an investor’s voting rights are adequate to grant it power over an entity, leadership must consider the effect of the voting rights on the power continuum. If the decision is not clear, they must also take into account the following facts and circumstances outlined in IFRS 10:


Assessing the link between power and exposure

Often an investor has greater incentive to obtain rights that reward power over an entity as it handles increased exposure to variable returns resulting from its involvement with that entity. Returns are not necessarily positive and can be negative, or a mix of both positive and negative. Some examples of returns include remuneration, cost savings, scarce products, proprietary knowledge, dividends, etc. Crucially, the magnitude of the returns does not factor into whether the investor holds power.

Key to determining if an investor has control is whether there is a link between power over an investee and returns. An investor that cannot benefit from its power over an entity does not have control. Likewise, an investor does not have control if it cannot use its power to direct activities that significantly impact the entity’s returns.

When leadership determines that an entity does not have control, the requirements of IFRS 11 and IAS 28 must then be considered to examine whether an investor has joint control, significant influence, or no governance over an entity.

The decision tree for IFRS 10

The following decision tree allows you to assess if IFRS 10 is the accounting standard that best suits your needs.

IFRS 10 decision tree

When is a parent company exempt from providing consolidated financial statements?

According to IFRS 10, a parent company is exempt from presenting consolidated financial statements if it meets all the following conditions:

Disclosures for financial consolidation

Disclosures are not specified in IFRS 10; however, the required disclosures can be found in IFRS 12 ‘Disclosure of Interests in Other Entities’. The accounting standard states that “a reporting entity should disclose significant judgements and assumptions made in determining whether it controls, jointly controls, significantly influences or has interests in other entities.”

Guidance for preparing consolidated financial statements under IFRS 10

We recommend reading the IFRS 10 guidelines in full. Here is a summary of just some of the critical areas the guidelines cover:

  1. Elimination of intra-group transactions and the parent’s investment.
  2. Introduction and adherence to uniform accounting principles.
  3. Financial statements used in the consolidation must all have reports issued with the same date.
  4. Accounting for losing control of a subsidiary.
  5. Accounting for changes in ownership interests where control is retained.
  6. Allocating comprehensive equity and income to subsidiaries.

Choose accounting software built to handle the complexities of IFRS 10

When it comes to compliance for financial consolidation, most companies will face a few challenges. You must invest in software that can appropriately meet the demands of accounting for multiple entities under IFRS regulations. Why not check out Multi-Entity Management, a solution built to help your company simplify processes and streamline financial consolidations.

starboard group case study financial consolidation multi-company