Technology can help companies manage their intercompany relationships more efficiently, but updates can easily delay the reconciliation process. Because intercompany is the last action during period close, reconciliation issues can cause the close to be late. This can lead to serious consequences, such as severe penalties from regulators.
Here’s how Oracle updates can impact intercompany transactions and what you can do to minimize the risks of them affecting your reconciliation process.
What Effects Can Oracle Updates Have and Why?
Intercompany management is essential as companies evolve and become more complex, whether that constitutes as changing the way their business is run or acquiring new entities as they go global.
Intercompany management ensures that their increasing volume of intercompany transactions—which are subject to different tax codes—are created, monitored, and settled before period close.
Updates can easily make this management much more complex, tedious, and time consuming in various ways.
For example, companies often use different operating systems. This means all of their intercompany documents will be in different formats. When companies need to import this data into their systems, they will have to convert it into the right format.
As companies evolve and become more complex, so do their intercompany transactions. That’s why having conflicting operating systems becomes a problem and is fraught with potential manual errors.
Another issue is that while your software is updating, you might miss out on automated reminders that are notifying you of important incidents relating to intercompany. By the time your software is up and running again, the reminders might be so far buried beneath other notifications that you don’t notice them. This is certainly not ideal because you need to be aware of any potential issues so you can contain them in time.
These two problems aren’t the only ones a company might face due to updates. Software updates can also cause unwanted disruptions in your reconciliation process. Since intercompany is the last task before period close, any issues in reconciliation can easily cause the close to be late.
The Root of the Problem
Since companies have varying needs and requirements, many choose to develop their own solution to manage intercompany. A customized solution is usually seen as an attractive option for many companies due to its ability to cater for a company’s specific needs—something that is often unavailable in off-the-shelf alternatives.
A recurring issue for companies that choose developed or customized solutions, however, is that they often struggle to respond quickly to change.
This is because developed/customized solutions are custom made. If there are changes in business needs—due to company growth, the result of legislation, or the release of an Oracle patch—you will be required to update your custom coding accordingly. There are no automatic updates.
Unfortunately, this isn’t a simple task; it’s incredibly tedious and time consuming. You will need to isolate the specific part of the code that needs to be changed—and then change it. It might even be more than one part of code. Any incorrect changes can easily bring your entire system down, and it can take hours or even days to amend your error and get your system back online. For that reason, you also need to test your solution after you’ve updated it.
As well as being time consuming, manual updates can also drain your resources. Unless you have expert developers who know what they’re doing, you’ll need to train your employees so they can amend the code. And while they’re changing custom code, they’ll be unable to focus on their usual tasks, which can affect your company’s productivity.
How Can This Be Prevented?
While developed or customized solutions are useful—in that they were specially designed to handle a company’s individual business requirements—one of the main drawbacks is that they’re affected by Oracle updates. This in turn affects intercompany management and reconciliation at period close.
Fortunately, there are ways to prevent this situation.
AGIS (Advanced Global Intercompany System) is a module within Oracle EBS that is specifically designed to streamline the creation and approval of intercompany cross charges and their subsequent reconciliation. As it’s built into the same technology as Oracle, AGIS will automatically follow suit when Oracle updates. This means you no longer need to deal with the hassle of manually changing the code.
While AGIS can help with intercompany management, it doesn’t have functionality for settlement, reconciliation, or reporting. So if you want to use AGIS to maintain intercompany balances, you’ll certainly struggle.
This is where you’ll need to use other software alongside AGIS. Virtual Trader (VT) is one such software product. Designed to maintain intercompany balance and relationships, VT automates the entire process to ensure reconciliation happens as seamlessly as possible. Like AGIS, it’s hosted by Oracle, so when Oracle updates, VT will do so as well.
VT software also comes with a collection of advanced features and functionalities to aid intercompany even further. These include:
Allows spreadsheets of any format, layout, or content to be imported and processed. Full audit and history of the evaluation procedures are also provided. This means there’s no need to convert, extract, and transfer your data anymore and risk losing vital content.
Automated offset title changes or cascade of title changes in the event that you need to record a change of ownership after the initial despatch of the goods.
Automated transfer pricing, with additional facilities to evaluate prices based on business scenarios and client-specific calculations.
Aging analysis so you can track which balances still need to be settled and when they’re due. Companies seldom settle their liabilities in one payment, and these open balances can easily become buried under new ones. VT aging analysis arranges these balances in order of due date (oldest first) so you can ensure your balances are always settled on time.
The Business Rules feature ensures that VT is flexible despite the fact that it’s not a customization. Companies need only to change their Business Rules, and the software will adapt accordingly.
Interested in Finding out More about Virtual Trader and How It Compares to Other Intercompany Solutions?
Intercompany is the last task during period close, so any reconciliation issues can easily cause close to be late. And with reconciliation already being a complex, time-consuming task, you don’t need the added stress of last-minute issues. That’s why it’s important you choose the right software to help.
Our guide, which compares four of the most popular and well-known intercompany solutions, can help you decide. Download it below.