The document discusses the challenges of intercompany reconciliation that impede the fast close of financial reporting in businesses, emphasizing the importance of improving this process to enhance efficiency and data quality. It suggests utilizing software solutions to automate and streamline intercompany reconciliation, emphasizing peer-to-peer communication to mitigate delays and simplify the process. The paper outlines a structured approach, including an action plan for companies to adopt technology-driven solutions to facilitate a faster financial close.

1. SAP White Paper
Enterprise Performance Management
IMPROVING INTERCOMPANY
RECONCILIATION FOR A FASTER CLOSE
DRIVING FINANCIAL EXCELLENCE

3. CONTENT
4 Executive Summary 13 Building a Business
Case for Improved
5 The Fast Close – Not Intercompany
an Elusive Goal Reconciliation
6 The Problem 15 Will a Consolidation
Solution Do the Same
8 The Way Forward Thing?
15 Setup Phase
9 Applying Technology 16 Reconciliation Phase
to the Reconciliation
Problem 17 Achieving the
Fast Close
11 Unique Process
Innovation with 18 SAP Solutions for
BusinessObjects Enterprise Perfor-
Intercompany mance Management
11 Setup Phase 18 For More Information
12 Reconciliation Phase
12 Completion Phase

4. EXECUTIVE SUMMARY
REMOVING THE SINGLE GREATEST BARRIER
TO THE FAST CLOSE
Companies are moving beyond the ini- However, as evidenced by a growing removing this process from the finan-
tial need to comply with legislation like number of case studies, some compa- cial close’s critical path and improving
the Sarbanes-Oxley Act and are focus- nies endeavor to deal with the inter- the quality of data. The use of software
ing instead on driving sustainability and company reconciliation challenge by for intercompany reconciliation projects
control into their corporate processes. employing technology to enable peer- provides a quick win for companies
Of the various initiatives supporting this to-peer processes and dramatically who adopt such solutions – resulting in
shift, the fast close – a concept used to save time in their financial close dramatic time savings with compara-
describe a company’s ability to com- process. tively little effort.
plete its accounting cycles and close
its books quickly – is perhaps one of This paper examines the issues behind
the best documented. What’s arguably the single intercompany reconciliation and out-
lines how companies can make impres-
Predating the compliance revolution,
greatest barrier to the fast sive progress when they employ soft-
the fast close forms a finance trans- close has remained con- ware solutions such as those from SAP
formation project that has a clear and Business Objects, an SAP
structure and well-defined methodolo-
stant – the completion of company.
gy, providing huge benefits to those the intercompany reconcilia-
companies that take on the challenge.
However, what’s arguably the single
tion process.
greatest barrier to the fast close has
remained constant – the completion of Companies have implemented solu-
the intercompany reconciliation pro- tions such as the BusinessObjects™
cess. Surprisingly, this challenge con- Intercompany application to improve
tinues to provide a bottleneck that the flow of communication during the
many companies have yet to tackle intercompany reconciliation process,
effectively.
4 SAP White Paper – Improving Intercompany Reconciliation

5. THE FAST CLOSE – NOT AN ELUSIVE GOAL
REMOVE THE RECONCILIATION BOTTLENECK
In today’s business environment, where However, by and large, close times are of intercompany reconciliation. As a
compliance and competitiveness are increasing – particularly in the United result, virtually every fast-close project
paramount, companies recognize the States, due the rigor of the Sarbanes- during the past five years in which
importance of the financial close and
its role as one of the most essential
characteristics of a successful global BPM International notes that 72% of all companies
enterprise – and they are under more
pressure than ever to shorten their surveyed spend significant time clearing intercompany
reporting cycles. differences, and 31% of survey participants identified
Driven by new regulations that mandate the process as a significant barrier to their close.
greater financial confidence and trans-
parency, companies are forced to deal
with heightened investor expectations Oxley Act – resulting in time- significant improvements have been
for accurate and timely financial com- consuming, labor-intensive efforts to made has included a project stream
munications. The fast and high-quality ensure the quality of financial data. It’s specifically tasked with examining and
close has now become synonymous no wonder that companies once again addressing this issue.
with allowing more time for value-added are focused on speeding up the com-
activities, creating more timely access pletion of their accounting cycles. Automation and process support for
to financial and nonfinancial data for the intercompany matching and recon-
decision making, and improving the To achieve a faster close, you must ciliation process via software is under-
work-life balance of key accounting scrutinize every step in the reporting utilized, and the employment of a suit-
staff during the close process. process to figure out where your com- able software solution would make a
pany can save time and how it can opti- significant advance in alleviating this
Significant steps have already been mize the process. Based on our experi- major cause of delay in the reporting
made to shorten the reporting cycle via ence working with some of the world’s process. In this paper we examine the
a combination of people, process, and leading companies, we’ve determined challenges and, as part of a fast-close
technology, and many companies have that one of the most significant bottle- action plan, we provide a framework to
achieved noteworthy improvements. necks in the close cycle is the process tackle this important issue.
SAP White Paper – Improving Intercompany Reconciliation 5

6. THE PROBLEM
INTERCOMPANY RECONCILIATION
Over the past five years, numerous function. On top of these problems, on corporate headquarters. Generally
research projects have examined the system deficiencies around intercompa- this means that staff members in the
interplay between the close and the ny processing and the lack of process central finance function are involved in
intercompany reconciliation process in automation are found to contribute to checking balances, correcting errors,
great detail. Intercompany reconciliation delays in the reporting process. and contacting reporting units to
and elimination are consistently identi- resolve issues and intervene in dis-
fied as two of the most common non- The BPM International study suggests putes. This process results in an ineffi-
value-added tasks slowing down the that the worst-performing companies cient vertical flow of information
reporting cycle. In its 2007 report on are taking upward of ten days to between headquarters and reporting
reporting processes and systems, resolve the intercompany process dur- units and back again, as shown in Fig-
BPM International notes that 72% of all ing a year-end close, while the best in ure 1, rather than a more efficient later-
companies surveyed spend significant class report an average of four days, al flow of information between the
time clearing intercompany differences, with ambitions to reduce it to three reporting units involved in the original
and 31% of survey participants identi- days.2 counterparty transactions.
fied the process as a significant barrier
to their close.1 The reason this remains such a prob- The process is also hindered by the
lem is perhaps bewildering at first, but means of communication employed:
Little or no improvement has been closer examination uncovers the exis- telephone calls, e-mail, and fax. These
made in this area since 2002 when sim- tence of significant process and tech- technologies are time consuming to
ilar studies were conducted. Compa- nology issues. In the traditional inter- employ, and they rely on the response
nies wrestle with a number of low- company matching and reconciliation time of the reporting units involved.
value-added supporting activities, process employed by most companies, The process is very procedure driven,
including correcting errors, rekeying the responsibility for resolving discrep- often involving filling out forms and
data, and following up issues with ancies in the intercompany balances strictly adhering to escalation
reporting units by the central finance declared by reporting units often falls procedures.
Traditional
Intercompany
Close books Consolidation
reconciliation
Day –5 Day +0 Day +5 Day +10
Reporting
unit A Phone, fax, e-mail,
HQ
regular mail
Reporting
unit B
Figure 1: Inefficient Flow of Information in Traditional Intercompany Processes
1. Consolidation, Reporting and Planning Functions in European Multinational Enterprises 2006 (BPM International, February 2007).
2. Ibid.
6 SAP White Paper – Improving Intercompany Reconciliation

7. It’s clear that companies could save The bottleneck slowing down the
time if their reporting units adopted a reporting process is the time taken at
peer-to-peer reconciliation process to headquarters to participate in the rec-
communicate and resolve differences onciliation process. If reporting units
directly with one another, thereby mov- could deal directly with one another in a
ing the responsibility for getting things peer-to-peer fashion, this obstacle
right from the central finance function would be eliminated, and the intercom-
to the reporting units themselves. At pany process would fall away from the
the same time, the units could use any close’s critical path. Such an achieve-
improvements in process automation ment would free central finance staff
as a catalyst to eliminate errors from from time spent on non-value-added
the process, thus improving the accura- tasks, enabling far more time to analyze
cy of reported figures as well. data rather than just gathering and
reconciling it, as illustrated in Figure 2.
Peer-to-Peer
Intercompany Close Uses for
Consolidation
reconciliation books saved time
Day –5 Day +0 Day +5 Day +10
Reporting
unit A
No value
Cost reduction 8%
Agree/disagree 10%
Reconciled Work fewer
Intercompany matching
intercompany
HQ hours 13%
Agree/disagree balances Meet 7%
62%
deadlines
Redeploy staff/resources
Reporting
unit B
Figure 2: Accelerated Close with Peer-to-Peer Processing Between Reporting Units3
3. Source: Fast-close survey conducted by Business Objects and BPM Magazine, May 2006.
SAP White Paper – Improving Intercompany Reconciliation 7

8. THE WAY FORWARD
FAST-CLOSE ACTION PLAN FOR
INTERCOMPANY RECONCILIATION
Stage 1 Stage 2 Stage 3 Stage 4
Vision, benchmark, Implement quick wins Implement big wins Conduct postimplementation
and review review
Create close Close processing, monitoring, and scheduling Corporate close
Perform“as-is”
scorecard to coach • Enterprise performance
review Establish framework
best and worst management
performers • Consolidation applications for continuous
improvement
Conduct peer-to-peer
Define vision intercompany
and benefits • Business intelligence Extend financial ex-
reconciliation • Ad hoc analysis and reporting
process cellence to planning,
• Financial information budgeting, and
management forecasting
Leverage data
Obtain executive integration tools, vali-
• Governance, risk, and
sponsorship dations, and controls for
compliance
right-first-time close
• Automated internal control
processes
• Access controls
Local close/enterprise resource
planning
SAP® and non-SAP software
environments
Milestone 2 Change management
Milestone 1 Milestone 3
Completed project plan Immediate timetable reduction Vision achieved
Figure 3: A Fast-Close Action Plan
a positive and determined frame of with intercompany reconciliation should
A fast-close project, like any other cor- mind for delivering the bigger wins as consider employing workshops to look
porate initiative, requires a structured part of a broader fast-close project. at the process and search for opportu-
approach with a methodology that’s nities to automate manual data entry or
supported by people, process, and As with the broader fast-close project, correction processes, as well as pro-
technology. These projects must be when your company assesses its exist- cesses that involve duplicated effort or
manageable, have clear but realistic ing intercompany reconciliation process unnecessary steps in the resolution of
objectives, and, as we’ve already seen, and how it can be improved, the first disputes.
almost certainly include an intercompa- step it takes should be to gather infor-
ny project stream. Figure 3 depicts a mation on the current process and Companies need to identify and elimi-
fast-close action plan,4 in which the determine how long it actually takes in nate the causes of unnecessary com-
BusinessObjects Intercompany applica- practice. You should review all financial plexity and cost (measured in staff
tion can play a key role as one of the processes associated with intercompa- days) in the existing reconciliation pro-
highest value-added quick wins for ny matching and reconciliation, togeth- cess. In so doing, companies should
cycle-time reduction in stage 2. Such er with the existing software and tech- aim to employ current best practices in
quick wins serve to produce almost nical architecture. In conducting this the form of peer-to-peer reconciliation,
immediate timetable reductions with preliminary review, you should identify which ultimately offers the greatest
very few required resources. Quick any gaps between current processes improvement in reconciliation times
wins also demonstrate that time sav- and best practices. Companies serious with the least amount of required effort
ings are achievable, putting people into about resolving the issues associated and resource.
4. The Financial Close: Optimizing Performance and Driving Financial Excellence (SAP AG, August 2008).
8 SAP White Paper – Improving Intercompany Reconciliation

9. APPLYING TECHNOLOGY TO
THE RECONCILIATION PROBLEM
REDUCING RELIANCE ON MANUAL METHODS
An examination of fast-close projects It’s also important to consider the point Any software solution should aim to
and additional quantitative research evi- at which a software solution can be eliminate time delays. One key way to
dence indicates that technology has applied to the process. By allowing do this is to use a solution that enables
been underutilized with respect to sup- your reporting units to reconcile balanc- real-time reconciliation views. One of
porting the intercompany reconciliation es and transactions directly away from the best options is Internet technology,
process. In most cases, existing con- the close’s critical path, you avoid try- where submitting data over the Web to
solidation and reporting tools report on ing to fix the problem after the event a central server offers an immediate
the process when it’s too late, thus trig- and thereby free up more time for val- overview of the intercompany reconcili-
gering the manual process to resolve ue-added activity, ultimately shortening ation process, irrespective of location,
mismatched balances and transactions the reporting cycle. To do this, it’s time zone, or language. In today’s glob-
(often using traditional time-consuming important that you are able to see al economy, your solution should be
tools such as telephone, fax, and instantaneously your intercompany available 24x7 and support multiple lan-
e-mail). Companies can overcome position and the difference between guages and currencies.
these challenges by defining a tech- what your company has declared and
nology solution, such as the one pre- that of your counterparty. Visual indica- Central to making your process more
sented below. tors and filters to identify problem efficient is getting the right people exe-
areas are equally desirable. cuting the right processes at the right
The first step in any software solution time with the right tools. This means
is to create an electronic information To assist reconciliation, your company devolving a certain level of responsibili-
flow, minimizing the use of manual pro- should employ a central intercompany ty – completing the reconciliation –
cesses as much as possible. You can’t reconciliation database. The advantage from headquarters to the reporting
completely eliminate manual processes of such a database is that it creates units. However, the central finance
– you usually encounter situations one version of the financial “truth.” function should recognize that, ulti-
requiring direct communication. Still, in Once balances are declared and recon- mately, responsibility and control must
implementing a solution, your company ciled, they remain that way. remain at headquarters.
should aim to reduce reliance on manu-
al methods as much as possible. As Automating previously manual process- Therefore, for engagement and user
needed, an alert mechanism should es minimizes the incidence of unneces- acceptance, it’s vital that you maintain a
prompt employees to undertake sary errors. It also reduces time delays common set of processes and tools
actions within the solution. However, at by employing software to process, that satisfy the needs of both the
the same time your solution must sup- compute, and report, thereby dramati- reporting units and headquarters. If you
port direct communication between cally decreasing the reconciliation time choose a Web-based approach, you
users by storing and making contact frame. However, it’s important to avoid can disseminate information via the
details of other users readily available automating processes that are inher- Web, regardless of whether reconciliation-
(telephone, e-mail, and fax details). ently flawed. In fact, the complete deadline and time-frame data or
redesign of processes to meet best important process and instructional
practices is preferable to eliminate information needs to be communicated
inefficiencies through automation. to all involved in the reconciliation
process.
SAP White Paper – Improving Intercompany Reconciliation 9

10. Centrally, your staff needs to relinquish which aren’t necessarily bad if they fol- • Does the solution support the
the day-to-day operational aspects of low industry standards. But they also desired level of matching (balances,
completing the reconciliation and move require careful management and transactions, or both)?
to more of an overseer role – monitor- implementation. • How easily does the solution allow
ing and controlling the process and the identification of problem data
intervening only where necessary. To Any new solution you choose should (does it support materiality and have
do this, headquarters must have the be able to fit seamlessly into your exist- filters or rules)?
confidence necessary to fully integrate ing technology and infrastructure. Fur- • How easy is it to add supporting
its technology, processes, and people. thermore, it should complement information into the solution (file
Your technology should support this by desired business processes. attachments and comments or addi-
providing a centralized view of the rec- tional and configurable data fields),
onciliation progress as well as the prog- You should ask the following questions, and is this functionality available at
ress of individual reporting units. It also among others: both the balance and transactional
should provide a mechanism for the • How easy is it to interface with level?
central finance function to intervene, source systems and with the eventual
arbitrate, adjust, and comment on the consolidation system (metadata and In addition, will your employees easily
reconciliation. Effective change man- data)? adopt and use the solution? Intercom-
agement is another integral factor in • Does the solution meet your organi- pany reconciliation is a simple but pain-
ensuring the success of a new zation’s technology and platform ful process. Any solution must be sim-
solution. requirements (operating systems and ple to use and must not be perceived
hardware)? as overly complicated.
When choosing a technological solu-
tion, an interesting question is whether
to build or buy. Building is attractive as It’s clear that companies could save time if their reporting
it results in a customized solution for
your business processes, but support, units adopted a peer-to-peer reconciliation process to
maintenance, and development are fac- communicate and resolve differences directly with one an-
tors that must be considered carefully.
Buying, on the other hand, provides the other, thereby moving the responsibility for getting things
security of a tried-and-tested solution right from the central finance function to the reporting
that is continuously supported and
improved upon. This benefit must be units themselves.
weighed against the fact that buying
may require the adoption of new con-
cepts, processes, and workflows,
10 SAP White Paper – Improving Intercompany Reconciliation

11. UNIQUE PROCESS INNOVATION WITH
BUSINESSOBJECTS INTERCOMPANY
PEER-TO-PEER SOLUTION – INDEPENDENT OF
CONSOLIDATION SYSTEM
Business Objects, an SAP company,
offers a unique peer-to-peer intercom-
pany solution that can work with con- Reporting
unit A
solidation applications from SAP and
Business Objects as well as other soft- ch
ing M
at
at ch
ware vendors. BusinessObjects Inter- Intercompany
M ing
company, now one of the world’s lead- Headquarters process
BusinessObjects™ monitoring Reporting Reporting
ing peer-to-peer intercompany Financial Consolidation, unit B Matching unit C
reconciliation applications, enables SAP® Business Planning
and Consolidation, or Reconciled
business units to reconcile intercompa-
Mat
any other consolidation intercompany
Ma
ing
ny balances in real time via the Web, application
chin
balances
tch
tch
Ma
tch
ing
g
Ma
ing
which, in turn, helps companies to
close faster. Using BusinessObjects
Reporting Reporting
Intercompany, your company can unit C Matching unit D
reduce time and effort from the report-
ing process by delegating intercompany BusinessObjects
Intercompany
reconciliation to its reporting units and
managing the flow of intercompany
information between them. Figure 4: Faster Intercompany Reconciliation with BusinessObjects Intercompany
BusinessObjects Intercompany pro- BusinessObjects Intercompany gives cess you use may be more complex
vides the tools for your business units you the tools to enable peer-to-peer and, as indicated above, is determined
to debate and reconcile invoices and reconciliation of intercompany balanc- by your company’s own working
balances directly with one other, elimi- es. Your employees can choose wheth- practices.
nating extra work and delays at the cor- er to load their balances or go one step
porate and divisional levels. In the tradi- further and provide detail down to the Setup Phase
tional process, divisions were required invoice level. This allows a flexible Before using the solution, an adminis-
to act as intermediaries, resolving dis- approach to data collection and recon- trator needs to prepare it for data pro-
putes that weren’t apparent until after ciliation, ensuring that the right level of cessing. This involves updating any
the submission of reporting packs. data is captured, reconciled, and changes in metadata or reference data
BusinessObjects Intercompany reported. that may have occurred since the end
removes intercompany reconciliation of the last reconciliation period. The
from the critical path, shifting the focus The process of reconciling invoices and administrator maintains:
so that the reconciliation process balances using BusinessObjects Inter- • Reconciliation periods by opening a
becomes an integral part of the closing company has three phases: setup, rec- new reconciliation period and setting
process of the business units and onciliation, and completion. The follow- the time frame for reconciliation
improves both the speed and accuracy ing describes a typical intercompany • Metadata by updating companies,
of the closing process (see Figure 4). reconciliation process. The actual pro- accounts, and currencies to take into
SAP White Paper – Improving Intercompany Reconciliation 11

12. account any changes; for example, generate reports to follow the inter- have been reconciled, the administrator
adding new companies or deactivat- company reconciliation process as “closes” the current period, ensuring
ing accounts that are no longer used well as determine how much work is that the solution is ready for the next
• Users by adding new users, giving outstanding and where they should reconciliation period.
access to companies, and removing focus their attention.
users who should no longer have • Invoice-level matching. Where users The administrator can perform the fol-
access to the solution have chosen to load balances and lowing operations:
• Central data by updating information invoices, an additional level of recon- • Freezing. All users are prevented
such as exchange rates and materiali- ciliation is possible. During invoice- from making further updates to inter-
ty levels to ensure data consistency level matching, the software automat- company data. Once the data in the
for all users
Reconciliation Phase By applying technology for intercompany reconciliation,
During the reconciliation phase, users you can make radical process change with little effort and
load the solution with data by importing
or entering data manually and then exe- potentially achieve significant gains in efficiency. These
cute the intercompany reconciliation gains aren’t all financial in nature and can include alleviat-
process. The solution provides the fol-
lowing features: ing the burden on the central finance function and trans-
• Matching engine. A key part of the forming its role into that of overseer rather than executor
functionality, the matching engine
allows companies to automatically of the process.
compare balances that have been
entered or loaded and calculate dif-
ferences in the headquarters’ report- ically compares counterparties’ database has been “frozen,” all users
ing currency. invoices and allows easy identifica- are able to export their intercompany
• State software. The highly developed tion of unmatched data. Since bal- balances.
state software manages the status of ance and invoice data loaded into the • Archiving and backup. Any closed-
balances. Some simple states include database can originate from different period data can be archived. This
open, reconciled, and unmatched, but sources, the software also compares improves the performance of the
more complex states are also han- the balance to invoice data to ensure database during the reconciliation
dled. Whenever a change in state synchronization. period. Performing a backup of the
occurs, the state software sends out database further safeguards the con-
e-mail alerts automatically. Completion Phase tents of the database.
• Data entry and review. Icons provide At the end of the reconciliation phase,
users with a visual summary of when the majority (if not all) of the
invoices and balances. Users can intercompany invoices and balances
12 SAP White Paper – Improving Intercompany Reconciliation

13. BUILDING A BUSINESS CASE FOR IMPROVED
INTERCOMPANY RECONCILIATION
RAPID RETURN ON INVESTMENT
A unique characteristic of corporate ini- Calculating Payback to Assess Potential Savings
tiatives that seek to improve the inter- Average cost of finance staff US$65,000
company process is the ability to easily
Average daily cost US$295
quantify rapid ROI. ROI can be mea-
Number of reporting units 100
sured in terms of the quality of the
License fee US$125,000
information provided and the resulting
reduction in errors, the amount of time Setup cost US$10,000
saved in terms of staff days by operat-
ing units, and the time saved at the Some assumptions can be made to
head office during the close, thereby provide input to the equation, shown in
reducing the close cycle. the table above. Clearly these vary by
size of the company, infrastructure
Based on the expected or actual num- costs, and average finance staff costs.
ber of days saved, an ROI time frame However, they are useful in providing
can be calculated easily for users of an indication of likely or potential
the application. A conservative target is savings.
in the region of a half-day’s worth of
saved work per reporting unit, with this A key assumption here is that it is more
reduction being a measure of effort risky and costly to build a custom appli-
saved across the organization rather cation than to purchase and use an off-
than elapsed time saved. the-shelf application. If you build a cus-
tom application, the equation is still
The ROI equation can be stated as applicable; however, the cost is likely to
follows: be greater and ROI is likely to be lower.
Payback is achieved when [cost of Some further considerations are that
0.5 staff day] x [number of reporting best-practice intercompany reconcilia-
units] x [number of reporting cycles] tion may not be supported, and there is
is less than [license fee or build cost] likely to be higher maintenance
+ [setup cost]. overhead.
SAP White Paper – Improving Intercompany Reconciliation 13

14. Business Objects, an SAP company, offers a unique
peer-to-peer intercompany solution that can work with
consolidation applications from SAP and Business
Objects as well as other software vendors.
Using these assumptions, it’s possible ket. The time freed can be applied to
to do a simple cost/benefit calculation. value-added activities to increase reve-
In the following table, you can see that nue or lower costs. Through improve-
full ROI is achieved within just over nine ments to the close process it should
months. This also shows that the bene- also be possible to achieve savings on
fit depends heavily on the number of annual tax payments and reductions in
reporting cycles performed. In general, audit fees.
companies reporting monthly derive a
far greater benefit than those reporting
quarterly.
A business case should also consider
that any calculation being performed
doesn’t take into account the immea-
surable benefits to the business of get-
ting faster, more accurate information
to the people who need it immediately:
that is, decision makers and the mar-
Nine-Month Model for Return on Investment
Number of reporting cycles 12
Savings US$177,000
Breakeven (years) 0.76
14 SAP White Paper – Improving Intercompany Reconciliation

15. WILL A CONSOLIDATION SOLUTION
DO THE SAME THING?
THE BENEFITS OF A PURPOSE-BUILT SOLUTION
Many of the consolidation and corpo- Financial consolidation and reporting solidating data, which then is part of
rate reporting solutions on the market solutions cover the breadth of function- the close’s critical path.
have established intercompany recon- ality necessary for statutory consolida-
ciliation and elimination modules. Com- tion and management reporting, provid- On the other hand, BusinessObjects
panies thinking of reengineering their ing a basis for financial control and Intercompany is a product specifically
intercompany processes often look to compliance. These solutions also designed to match intercompany data
these modules as the cure for all ills. include functions to match intercompa- interactively in a peer-to-peer fashion
Are they correct to do this? ny accounts within the consolidation over the Web. It deals not only with
process, as is necessary for global intercompany balances but offers a
To answer this question, it’s instructive consolidation and reporting processes. detailed level of reconciliation down to
to compare and contrast the processes The intercompany balance-matching the invoice level.
required to perform an intercompany process is either included in the con-
reconciliation in typical financial consol- solidation category of reporting or is a The table below compares the process
idation and reporting solutions with a category in itself. However, as men- and the individual steps that need to be
purpose-built intercompany reconcilia- tioned earlier, consolidation solutions performed to complete the intercom-
tion solution. provide value only when you start con- pany reconciliation. Note the number of
steps and the complexity of each.
The Setup Phase
Financial Consolidation and BusinessObjects™ Intercompany The Setup Phase
Reporting Solutions In comparing the two setup phases, it’s
1 Set up interfacing (define templates clear that more steps are required in
for metadata, balances, and invoices) the case of a financial consolidation
1 Set up metadata (companies, 2 Import metadata (companies, and reporting solution. Although some
accounts, currencies, and users) accounts, currencies, and users) of these steps are complex, they serve
2 Build the category (sets of accounts, the dual purpose of helping to prepare
analysis hierarchies, and translation for the consolidation.
rules)
3 Design specific data-entry
schedules
4 Design specific matching and
analysis reports
5 Set up the matching rules 3 Set up matching rules (define
matching accounts, match on local
or transaction currency amounts, and
define materiality rules)
6 Roll out data entry and normal 4 Set period and start the
monthly data-collection and reconciliation process
reporting processes
SAP White Paper – Improving Intercompany Reconciliation 15

16. Reconciliation Phase
The Reconciliation Phase BusinessObjects™ Intercompany
Financial Consolidation and Reporting
Solutions
1 Reporting unit – link to Web site or 1 Reporting unit – link to Web site
client-server application to begin
monthly data collection processes
2 Reporting unit – enter or import 2 Reporting unit – enter or import
intercompany data intercompany data
3 Reporting unit – run controls and
publish data to central finance office
4 Central – integrate the reporting
unit data
5 Central – define and run consolidation
processes
6 Reporting unit – run analysis reports 3 Reporting unit – adjust balances
manually and reconcile interactively
with counterpart
7 Reporting unit – go back to data entry
and adjust balances
8 Central – run analysis reports 4 Central – run progress/analysis
reports
5 Central – freeze all reporting units
9 Reporting unit – finalize and submit to 6 Reporting unit – export to consolida-
consolidation system tion system
Again, it’s interesting to note the sig-
nificant requirements imposed on the
central finance function by a financial
consolidation and reporting solution –
something that’s almost absent in
BusinessObjects Intercompany
(see the table above).
16 SAP White Paper – Improving Intercompany Reconciliation

17. ACHIEVING THE FAST CLOSE
USING TECHNOLOGY FOR INTERCOMPANY
RECONCILIATION
are achievable. Gains can include allevi-
By allowing your reporting units to reconcile balanc- ating the burden on the central finance
function and transforming its role into
es and transactions directly away from the close’s that of overseer rather than executor of
critical path, you avoid trying to fix the problem the process. Empowering reporting
units to solve their own issues rather
after the event and thereby free up more time for than being directed by headquarters is
value-added activity, ultimately shortening the report- a key improvement resulting in a better-
quality close. And taking the intercom-
ing cycle. pany reconciliation process out of the
critical path results in a faster close;
resolving this issue makes it the
number-one fast-close quick win.
The fast high-quality close is as impor- intervene and get heavily involved in
tant today as ever, and the ability to order to complete the traditional hierar-
resolve your intercompany bottlenecks chical reconciliation process.
is a key factor in achieving your fast-
close ambitions. Because consolidation By applying technology for intercompa-
solutions are inadequate at managing ny reconciliation, you can make radical
both the depth and interactivity neces- process change with little effort and
sary for the intercompany reconciliation potentially achieve significant gains in
process, central finance departments efficiency. These gains aren’t all finan-
of companies worldwide are forced to cial in nature, although attractive ROIs
SAP White Paper – Improving Intercompany Reconciliation 17

18. SAP® SOLUTIONS FOR ENTERPRISE
PERFORMANCE MANAGEMENT
COMPREHENSIVE FUNCTIONALITY TO IMPROVE
EFFECTIVENESS AND PERFORMANCE CONTROL
BusinessObjects Intercompany is part For More Information
of the SAP® solutions for enterprise For more information about how the
performance management – a compre- BusinessObjects Intercompany
hensive set of solutions that help your application can improve your financial
company capitalize on the value of your performance, call your SAP represen-
existing data assets. With these solu- tative today or visit us on the Web at
tions, your organization becomes more www.sap.com/solutions
agile, gaining organizational alignment, /enterprise-performance-management
visibility, and greater confidence that /intercompany-reconciliation/index.epx.
give you optimal control and competi-
tive advantage. These solutions can For additional information about
integrate with SAP Business Suite financial consolidation, go to
applications; SAP solutions for gover- www.sap.com/solutions
nance, risk, and compliance; and the /enterprise-performance-management
business intelligence platform from /fincons/index.epx.
SAP and Business Objects. As a result
you can maximize business profitability,
manage risk and compliance, and opti-
mize corporate systems, people, and
processes.
18 SAP White Paper – Improving Intercompany Reconciliation

19. SAP White Paper – Improving Intercompany Reconciliation 19

20. 50 090 407 (08/08)
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