The Importance of Intrachain for Accounting
Dear Intrachain Community,
In last week’s post we have explained why data is so important for businesses and how our product Intrachain Business solves the accounting problems every big corporation faces in today’s world.
Today, we want to talk in specific about the importance of Intrachain for Accounting.
The Problem
As we have demonstrated in the past: there are several problems large firms face today when collecting accounting data. The most significant problems are: Inefficiency, human error, and high costs.
At the core of those problems is the fact that the management of most firms calls for faster closing of books. This is mostly because a fast closure promises the reduction of costs.
However, research shows that a fast closure of the books in fact increases costs. When aiming for a fast closing of the books, the process of intercompany reconciliation is considered the most significant bottleneck. A survey conducted by BPM revealed that 72% of all participating companies spend significant time clearing intercompany differences. This year Trintech has estimated that the approach of Excel reconciliations uploaded to a central server leads to approx. 96 lost working days a year.
One reason why manual reconciliation is inefficient is because it has proven to be prone to human error. As management calls for faster closure, finance teams are facing a trade-off between speed and accuracy, leading to accounting errors and certain open or unreconciled items being carried forward. The cost of correcting these mistakes is usually several multiples of the cost of initially completing them correctly.
In consequence this does not only complicate the intended fast closure of books, but is also extremely costly. For global companies which often own up to hundreds of subsidiaries, this can become a considerable problem.
Several aspects are responsible for occurring mistakes during transaction processes. More specifically, the following problems can occur: Incorrect accounting items, Incorrect bookings, as well as Currency differences
As a result of all three problems, reconciliation does not happen automatically and the correction of occurring faults is very time and cost consuming.
The Solution
Finally, after demonstrating all the problems that today’s accounting brings along, we will explain what solution there is.
All of the problems described above make accurate accounting practices a burden. It is in the interest of any firm, its shareholders, and CEO in particular, to have a process in place that resolves transaction inconsistency. At the same time, the process should be transparent. This is not only important for financial reporting and internal decisions, but also for a company to fully comply with tax laws and transfer pricing requirements. Therefore, a solution is needed that helps firms to develop accurate and efficient intragroup accounting practices.
Intrachain Business offers a blockchain solution to solve the common concerns of large companies by automating accounting transactions and avoiding manual reconciliation.
Our software tracks user behavior data and transfers them to the blockchain. In a next step, these condensed data serve as the basis for the correct recording and allocation of intercompany services. Smart contracts are used to transfer the involved cost transactions to the respective accounting systems within the group of companies. The customer can keep an overview of transactions and cost allocations with the Intrachain interface.
In today’s blog, we have elaborated on the problems every firm faces in today’s world when it comes to accounting. The most significant problems are: Inefficiency, human error, and high costs. All of the problems make accurate accounting practices a burden. A solution is needed that provides firms with accurate and efficient intragroup accounting practices. We believe that Intrachain, is exactly the solution to all of those problems. We solve the common concerns of large companies by offering a blockchain solution that automates accounting transactions and thus avoids manual reconciliation.
In next week’s blog post, we will examine the unique characteristics of blockchain to show one more time how Intrachain will revolutionize the accounting world.
Stay tuned!
Did you like this post? Tap the clap icon :)
