A major energy company improved its performance by making sense of hundreds of intercompany loans and the complex tax and accounting challenges they caused.
A global energy company with operations in more than 100 countries was suffering growing pains as it attempted a number of acquisitions and a historical focus on decentralized operations. The lack of integration resulted in a business and technology infrastructure that hadn’t kept pace with the growth of the company. It lacked standardized, automated processes, was understaffed, and was under significant compliance pressure. An overhaul of its Finance capability as well as strategies for improving controls and the effective tax rate were required.
Our cross-functional team, led by Accounting, Tax, Treasury, and Finance, was able to identify a number of opportunities in the tax area that were directly related to issues with the underlying accounting. We set out to help create an integrated solution to reduce risk and simplify the intercompany loans process, creating a standard template and process to recalculate 450 intercompany loans based on their unique attributes. Next we commissioned the development of an Intercompany Database, using SQL with a Web front end to become the loans sub-ledger, accessible to more than 200 users worldwide. We helped create a standard template for the loan schedules corrected historical data, and helped develop core management reports and a dashboard that provides insight for decision making and preventive controls to maintain quality.
Our efforts to help simplify, standardize, and automate the client’s finance operations have paid off. Accounting has sped up the generation of its interest accrual reports from two weeks to five minutes, while Treasury has decreased its loan file processing time by more than 80 percent while simultaneously eliminating the earlier errors in the loan schedules. Global visibility to the database promotes transparency, enables reconciliation to G/L, and creates an audit trail, and Tax is able to optimize its tax planning now that it knows it is working with accurate information.
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