Who knows what when cross-border transactions are processed

Each role sees part of the picture. The entity accountant knows why a transaction happened, treasury knows when cash moved and at what rate, payables knows what the supplier was promised, and the consolidation team knows what must eliminate. Trouble starts wherever someone books something the others cannot see.

The entity accountant

The local accountant holds the commercial story. They know which contract a charge relates to, how local tax treats it, and which cost centre should carry it. They often know the person at the sister company who agreed the recharge over a phone call.

What they rarely know is how the counterpart booked the same item. A management fee raised in one entity at the local spot rate may be accrued in the other at the group rate, in a different period, or not at all because nobody forwarded the invoice. Each side looks correct on its own ledger. The difference only surfaces when the group trial balance refuses to eliminate, and by then the people who could explain it have moved on to the next close.

Payables and payment processing

The payables team knows the invoice, the order behind it and whether goods or services were received and accepted. They know which items are on hold for failing a match and which vendors carry open credits that can be netted. They decide whether an early payment discount is worth taking.

They do not always know that a supplier invoice from a group company should be settled through intercompany netting. So it gets paid in cash, treasury settles it again through the netting run, and someone spends weeks unwinding a duplicate. Foreign invoices cause a quieter problem. The rate used to convert at approval may differ from the rate at which the bank actually pays, and the gap lands in an exchange difference account that nobody owns.

Staff moving between countries are a special case. Human resources knows the relocation was approved and what the package covers. Payables sees a stream of claims for shipping, temporary housing and advances, with no view of the authorising decision. Matching each claim back to that approval is slow, and advances that never get cleared sit as receivables for a long time.

Treasury

Treasury knows what actually left the bank, on which date, at which rate and under which hedge. They hold the schedule of payments approved but not yet due, and they know when a netting settlement is planned.

They seldom know why. A single netting settlement can clear many underlying balances across several entities. The bank statement shows one line. Local accountants then cannot trace their individual invoices to cash, so they leave items open or clear them against the wrong balance.

Consolidation

The group team sees every entity's trial balance and knows which accounts must agree with which. They own the elimination rules and the tie points between the general ledger and the subledgers.

Their blind spot is source documents. Faced with a mismatch near a deadline, they post a top side adjustment at group level. It fixes the consolidated numbers. It never flows back to the entities, so the same difference reappears next period and gets patched again. Over time the group adjustments become a second ledger that only a few people understand.

Fixed assets moving between entities

When equipment or software transfers inside the group, the sending entity knows original cost and accumulated depreciation. The receiving entity records whatever value is on the transfer document. Any profit on the transfer has to be removed at group level and the depreciation recalculated. The asset register owner is often the last to hear, which is how depreciation drifts between local and group books.

Where the gaps show up

Suspense and clearing accounts are the clearest symptom. Large manual journals at period end are another, especially ones posted by the group team with thin support. Recurring exchange differences on balances that should net to nothing point straight at a timing or rate disagreement between counterparts.

Questions to ask the people who run it

The documented process usually describes how things should flow. These questions uncover how they actually do.

• When an invoice arrives from a group company, how does anyone decide whether it is paid in cash or settled through netting?
• Which rate is used to record an intercompany charge, who chooses it, and does the counterpart use the same one?
• What happens to a mismatch found at consolidation? Does the correction ever reach the entity ledgers?
• Who clears the suspense account, and what is the oldest item sitting there now?
• How does a local accountant link a netting settlement on the bank statement to their individual invoices?
• When an asset moves between entities, who tells the register owner, and what value do they record?
• For relocation and travel advances, who confirms the advance has been used and closes it out?
• Which manual journals get posted every period without fail, and what problem is each one quietly fixing?

The answers to that last question tend to be the most revealing. A journal that recurs is a gap between roles that someone has learned to live with.

APQC's Process Classification Framework® (PCF) is an open standard developed by APQC, a nonprofit that promotes benchmarking and best practices worldwide. To download the full PCF or to view definitions and measures, please visit www.apqc.org/pcf.