Intercompany reconciliation process flow sample: Get your colleagues on board and keep them accountable

Writen by Stefan Farrugia • 26th June 2018 < back

The most important part of your intercompany reconciliation process flow will always be your people. No matter how advanced tech gets, you will need good people and the right processes in place to make it all happen.

When preparing for the consolidation of financial reports, organizations with multiple subsidiaries need to reconcile activity between the various reporting entities. During this consolidation process, certain transactions between entities will need to be eliminated so as not to create an overflow of figures or to provide erroneously reported figures.

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 towards inter-company reconciliation is to collect data from all subsidiaries and run reconciliation reports on this data. The problem with this method is that the data sources differ considerably, as do the tools used to run the reconciliation. Often you are looking at a scenario which uses a combination of excel sheets and a consolidation tool.

Once the reconciliation is complete the data is sent back to the various entities for analysis.  At this stage the error-discovery process starts, and information is imparted to and fro until all issues are resolved. This is quite a slow process, and normally takes a long time to conclude, as it is usually handled by email or over the phone where questions on why transactions are not matching are asked and solutions for these issues are sought.

When companies adopt a specific tool that allows them to share inter-company data, whilst overseeing reports at every stage, it becomes much easier to tackle errors and reconciliation processes prior to the final data being pulled out for final reporting.

By bringing in smarter consolidation software solutions, new process that involve people, systems, and technology come into play to create a new improved workflow. One that is more interconnected at an earlier stage.


Traditional vs Automated Approach: 

Traditional Approach

Entity -> provides data for consolidation -> Central CFO Manages Consolidation reports -> Data is fed back to Entities -> Errors are looked into and data re-submitted -> process is repeated until close.


Automated Approach

Entity Accounting -> Entity reconciliation peer-to-peer reports & data exchange run as required -> Correction of errors -> Main consolidation is closed.


People, processes and technology will always play a crucial role 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!