Organizations often deal with numerous source systems, each with its own data formats and standards, making consolidating information difficult. In addition to ERP systems, this can also include various homegrown systems and data sourced from commercial websites, customer platforms, and macro-embedded tools, among others.

Multiple ownerships of the reconciliation and settlement processes, often with their own optimization goals and initiatives without centralized communication, can further integration difficulties. For example, one team may spend funds on purchasing an intercompany solution with potential netting capabilities while the in-silo treasury team starts an initiative to automate their own processes with another software vendor, and both may have overlapping areas. This may waste resources and energies if the two teams don’t communicate their scope and goals and miss any possible collaboration or cross-function solutions.

The manual nature of the reconciliation processes can significantly delay settlements, leading to inefficiencies and increased operational costs. Take the manual filtering and weeding process. Identifying trading partner relationships, settlement frequency, settlement-eligible transactions, and net positions often require extensive manual effort. For example, suppose you ask your intercompany team or treasury team how intercompany balances are getting settled today. You may hear that some intercompany balances are netted by outsourced services, others are in the treasury system, and the remaining balances are netted and settled on an ad hoc basis. The required manual filtering and settling of these balances from multiple entities in disparate systems can challenge the function. Business units and payment centers also frequently rely on manual communication for transaction approvals, further slowing the settlement process and complicating the intercompany accounting team’s efforts.

Establish a central repository for all intercompany transactions, regardless of the source system. This repository acts as a single source of truth, which simplifies and streamlines data management.

Identify clear ownership with defined roles and responsibilities within the reconciliation process to reduce manual errors, enhance oversight controls, and improve the efficiency of out-of-balance handling.

Drive automation through matching rules by identifying consistencies between source systems and automating the reconciliation process using predefined matching rules. This reduces manual intervention and speeds up the entire process.

Separate settlement transactions post-reconciliation by establishing clear criteria—such as timing, terms, responsible parties, and thresholds—that identify settlement-eligible transactions from the central repository. This ensures that only relevant transactions proceed to the settlement stage.

Group transactions to reduce costs by implementing netting requirements to group transactions that can minimize the cost of unnecessary excess settlements, which in turn may optimize cash flow and reduce transaction fees.

Speed up reviews and approvals by developing templates that provide a consolidated view of settlement transactions and net positions to facilitate quick and easy reviews and approvals by treasury teams.

Automate communication with payment centers by utilizing system capabilities and workflow automation tools that send settlements directly to payment centers and limit the need for manual communication, reducing delays and streamlining the approval process.