Blockchain technology is a critical solution to the intercompany issue as it will automate the entire intercompany process, eradicating the need for intercompany reconciliations, and ensuring that any balances and issues are surfaced quickly and dealt with efficiently
- Eliminate reconciliations and manual errors
- Headcount efficiency
- Liquidity management
- Foreign exchange risk is minimized
- Foreign exchange can be removed by using cryptocurrency
- Tax regulations
- Local regulations
- Acquisitions and mergers
1. Eliminate reconciliations and manual errors – if you completely automate the intercompany process, via agreed rules/consensus and automation of transactions, you will remove the need to reconcile the balances. You will instead move to an exception management prioress whereby exceptions are highlighted automatically and dealt with quickly
2. Headcount efficiency – There are many people working on reconciling these transactions and these could total hundreds of people. These roles will be removed using Blockchain technology and the remaining teams can focus on agreeing the intercompany process, implementing them and dealing with exceptions and errors
3. Liquidity management – once you have a clear view of your balances, especially cash, you will be able to manage the day to day cash needs of your enterprise quickly and transparently. You can move cash quickly to where it is needed, and ensure that your borrowing and expenses are minimized via transparent planning using the data held on the Blockchain.
4. Foreign exchange risk is minimized – nobody likes paying fees for exchanging currency, so a well-planned FX strategy is a must. This can only be managed if you have a transparent view of all your cash, across all your entities
5. Foreign exchange risk is removed using cryptocurrencies – one real use case for cryptocurrencies, is for international payments. If the group decided to use one currency across their business, they will remove the FX risk and transact on a very low cost basis vs changing different currencies across the group
6. Tax regulations – Tax is a globally complex area. There are many tax laws which are different across countries, entities and industries. Managing your tax to be the most efficient needs a transparent view of all the entities in the group and a single, and accurate, view of all the data and balances. The tax experts can then maximize the tax in a legal and efficient way.
7. Local regulations – these vary for each country, entity and industry. There are many different rules and regulations that each entity within the group must adhere to. Having transparent view of the entire business, will enable the group to ensure that each entity is able, and armed with the right data, to deliver the requirements of their regulations as and when they are required.
8. Acquisitions and mergers – Global enterprise groups are often buying and selling entities within their group. Intercompany balances does not help this process and can cause issue around valuations and regulations when they are trying to buy or sell an entity. Blockchain technology can help provide a transparent and accurate view of the single entities balances, which can then be confidently understood and trust in the transaction.
