![]() ![]() It uses technology and expertly designed systems to create clarity with respect to data, processes, drivers, and logic surrounding all intercompany financial activity, including non-trade. Intercompany financial management (IFM) is a comprehensive approach for managing intercompany transactions and related accounting. Mastering Non-Trade Transactions with Intercompany Financial Management The result is often dysfunction, or decrees from the C-level that settle the issue, but don’t solve the underlying problems of clarity and accessibility. Every department that serves multiple entities-real estate, healthcare, legal, technology-will naturally promote its own view on what the drivers and logic should be. It can be difficult or impossible to get various business units to agree on the drivers of intercompany non-trade and on the logic for processing non-trade. Resolving non-trade disputes or simply straightening out confusion is labor-intensive and expensive, as companies struggle to substantiate tax filings, or hustle to close the end of the quarter. ERPs simply aren’t set up to handle intercompany situations and various data silos make the problem even more difficult to solve.Įven a single repository of data or data lake does not remediate on-going ad hoc management of non-trade intercompany processes. Add to that the common and complex situation of a multinational with multiple ERPs that change with each new acquisition and update. Even with a single global ERP instance, intercompany is often a tangle, without enough transparency, granularity, definition, or access of data. Non-Trade Transactions are Often a TangleĪn inconvenient general truth about intercompany transactions, and non-trade intercompany in particular, is that no ERP handles it well. Increased audits and possible loss of reputation due to substantiation mistakes impacting taxation in a particular jurisdiction ![]() Inability to close quickly and with confidence Inability to achieve a tax-effective, efficient supply chain Unacceptably large drains on capacity as talent spends too much time unraveling non-trade settlement confusions ![]() Tax leakage due to inability to substantiate losses in a given jurisdiction The impacts of mismanaged non-trade transactions on a multinational include:Ĭonfusion and conflict among different business units What Are the Impacts of Mishandling Non-Trade Transactions? Since 70% of global trade is intercompany related, and because a growing proportion of intercompany is made up of non-trade transactions, non-trade presents a challenge for multinationals who want to maximize tax savings, efficiency, and value. Compared to trade transactions, which are more easily defined and documented with billing and payment documentation, non-trade transactions can quickly become tangled, vague, and difficult to describe, track, and substantiate in accounting and taxation contexts. This may be easiest to grasp in contrast to trade, which concerns goods and services sold as part of a multinational’s usual intercompany trading activities. Intercompany non-trade transactions primarily encompass non-product transactions between entities in the same corporation. Broadly speaking, non-trade transactions are those which aren’t part of a firm’s “ordinary” business activity, including corporate allocations, shared services charges, services charged between business units, and many others. ![]()
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