Growing your SME will probably mean that your organisation needs to open new offices, plants, locations etc. to meet the needs of your global customers and to keep costs down. Such growth will also bring with it a review of your processes, particularly in sales and inventory; to ensure that optimum fulfillment rates are reached and customers keep coming back.
This might mean that your stock is stored in one central location and dispatched around the world, while other satellite offices are processing customer orders. The paperwork, invoicing and accounting needed for such complex enterprise management can often cause lengthy month and year-end processes, inaccuracies and leakages in stock and cash flow.
Intercompany business processing describes business transactions which take place between two plants in different company codes belonging to one organization. The ordering plant orders goods from a plant which is assigned to another company code.
Intercompany challenges often faced by SMEs:
- Inaccurate, timely and cumbersome data storage and sharing
- Time lapses in obtaining accurate data, resulting in late or unfulfilled customer deliveries
- Duplication of work effort across offices, leading to frustrated staff who cannot easily complete their tasks
- Little opportunity for cross-company financial transparency
Intercompany solutions enjoyed by SMEs leveraging SAP Business One
The SAP Business One Inter-Company add-on, allows businesses who are already running SAP Business One to manage inter-company transactions easily and efficiently across multiple entities; two main processes are sales and stock control.
Intercompany sales process in SAP – an example
A centralised company has multiple ‘plants’ or locations storing products ready to be shipped out to customers when orders are placed. While each of these locations belongs to the same parent company, they have their individual company code for accounting and reconciliation purposes.
- A customer makes an online purchase from a sports shoe company in Singapore
- The customer receives their invoice from the Singapore company and has all customer service support provided by them
- The sports shoes are dispatched from the company’s Philippines-based location and shipped directly to the customer
- The Philippines-based plant sends an intercompany (IC) invoice to the Singapore plant for the sports shoes
- The Singapore company pays the Philippines-based plant the invoice (along with any pre-determined % for delivery and fulfilment work)
- The accounts are automatically reconciled at the month and year end and no manual work is required
- If the order is cancelled at any time, the IC process and invoices are also cancelled and reconciled
- Single-level billing (as in the example above) as well as multi-level billing is possible. Using the above example, multi-level billing would involve another plant, i.e. a European head office, and the same principles for IC invoicing apply
Intercompany stock process in SAP
The same principles for intercompany sales processing can also apply to intercompany stock / inventory processing.
- Automatic collaboration between headquarters and its subsidiaries/plants
- Transactional focus, providing fully integrated business processes
- Transparent view of outstanding stock transfers and stock-in-transit
SAP Business One’s intercompany solution has helped our SME clients enjoy the following benefits:
- Holistic financial transactions and consolidation across enterprise data
- Out-of-the-box solution, quick and easy implementation
- Leverage tried and tested industry and SAP best practices
- Instant support for SAP Business One companies who are located across multiple geographical locations
- Multi-currency support enables accurate, real-time inter-company transactions in a range of currencies
- Master data replication (as well as users being able to specify other data areas to replicate, e.g. item master data or bill of materials)
- Consolidated credit limit check and consolidated account balance (across all companies and providing users with a warning message if limit is exceeded)
- Centralised payments (ability to delegate payment processing to a branch company)
- Brand inventory in warehouse support (enables users to view global data on the status of stock, orders and deliveries)
- Consolidated sales analysis report (ability to break down sales reports per branch company)
- Remote query execution (queries can be carried out across all inter-company databases to reduce ad-hoc enquiries and reporting)
- Business transaction notifications (users can be notified of specific transactions according to their requirements, across all branch companies)
If you’re an SME struggling with inter company processes, let the Blue Ocean Systems team of SAP experts unravel the mess for you. Contact us today for immediate guidance on your processing needs.