By Zoey Czech
To save money, parent companies often purchase services and supplies in large quantities at a discount to allocate to their various subsidiaries, and then issue a sales order to each of those entities for the portion of goods or services they receive. This is just one example of a transaction that can occur between entities in your growing business.
However, this type of intercompany transaction can be challenging for the finance department because payments for those goods can’t be included in consolidated profit and loss (P&L) statements and must go through an elimination process. Finance departments are already stressed with creating an efficient close process and potentially overstating revenue or understating expenses could lead to problems with an audit.
What is the solution? Let’s take a look at how an enterprise resource planning (ERP) system can help streamline intercompany transactions, minimize data entry issues, reduce errors and create efficiencies to save your business time and money.
How Does ERP Optimize Month-End Processes?
Manufacturing is experiencing a resurgence, which is great for business, but finance departments are feeling the added pressure of managing an influx of data. Tracking intercompany financials manually can be burdensome and the process may be prone to human error. The challenge grows when an organization has hundreds of different intercompany transactions that need to be eliminated at month-end.
With the right ERP system, intercompany purchase orders and sales orders can be created from one easy-to-manage screen so that you don’t have to navigate between multiple dashboards, and you can generate elimination journals automatically. You can easily run, view and consolidate financial statements for each subsidiary in real time. This saves significant time during the month-end close process by eliminating the need to manually create journal entries and allocate intercompany expenses. An ERP system provides the parent company with a real-time roll-up of costs, revenue and commissions for all its subsidiaries.
Not All ERPs Are Created Equal
Not all ERP software can properly handle intercompany transactions because they’re not tailored to accommodate the unique structures of companies with multiple subsidiaries and lack the functionality to link various departmental data together. As its name suggests, NetSuite OneWorld ERP has the capability to package together multiple functionalities into one system, including customer relationship management (CRM), warehouse management, eCommerce, marketing, capacity planning, operations, finance and more.
Additionally, it allows organizations to easily manage orders and intercompany financial transactions between multiple subsidiaries, business units and legal entities on one screen in one unified system, eliminating multiple tabs and manually intensive, spreadsheet-based reporting.
From a user perspective, the dashboards are easy to use and highly intuitive. Rather than trying to master multiple software platforms to reconcile reports, adjust inventory and run month-end financials, users can learn and work within one system to save considerable time, reduce redundancies and minimize frustrations. The time and labor savings can be significant — organizations using NetSuite report they accelerated their financial close by 20–50% and reduced their audit preparation time by 50%
For companies with a global presence, NetSuite OneWorld can even handle foreign transactions and various currencies. If intercompany transactions occur across borders, NetSuite’s built-in exchange rate integration can automatically allocate proper funds to various accounts. It’s important to consider that even if your organization doesn’t handle international transactions now, it may scale to have a global presence in the future. Knowing your ERP has the capability to scale with your business is reassuring.
What Does a Successful ERP Implementation Look Like?
When exploring whether NetSuite OneWorld is right for your organization, be sure to work with a provider that specializes in manufacturing and is experienced in the various phases of implementing ERP. To ensure a successful implementation, consider these three areas:
- Change Management: It’s important for your ERP provider to work closely with managers and leaders to get buy-in and generate excitement for the solutions. These change champions will help others on their teams realize the benefits and eagerly anticipate the positive impact a new system will bring to their daily work.
- Transparency: Your provider should help set expectations for users to understand how their workflows and processes will change and be optimized over the long term, while still being transparent and open about the challenges that inherently come with learning a new system.
- Comprehensive, Ongoing Support: Full implementation of NetSuite OneWorld means a provider will help you design a solution for your unique needs, train users, go live with the system and then support you as your business goes forward, including periodic reviews to continually optimize the system.
And that’s where Wipfli can help — our team is NetSuite-certified, which means our consultants and developers have the knowledge and experience to cover all implementation areas. The result is a project that’s delivered on schedule and within budget. Reach out to us today to talk next steps and explore whether NetSuite OneWorld ERP is right for your organization.