Intercompany is a Product

A Global Product & Valuable Tool

Guest Article by Pheona Bowser
Certified Scrum Product Owner | Global Transformation Leader | ERP Implementation | Continuous Improvement | Intercompany Process Owner, Nashville, Tennessee

Have you heard of the Hamster Wheel theory? No doubt you have and experienced it. Well, I can recall making the correlation between this dreadful wheel, with no end in sight, and my experience with Intercompany. In today’s interconnected business landscape, multinational corporations are facing, what seems to be, never ending challenges to optimize operations across different jurisdictions.

The concept of Intercompany as a product can be the effective tool needed in achieving this optimization. By leveraging Intercompany transactions as a product, companies can unlock significant transfer pricing benefits.

Intercompany as a product refers to the strategic utilization of internal transactions between various entities within a multinational corporation (MNC). Instead of treating these transactions purely as financial or operational exchanges, MNCs now recognize the potential to package and market international transactions as products or services. This approach allows for greater efficiency, transparency and compliance in cross-border operations.

Significant benefits for multinational corporations and the transfer pricing advantages Intercompany as a product offers:

• It enables MNCs to streamline their internal processes and align them with market demands. Companies can establish clearer service-level agreements, ensure consistent quality and deploy a standardized pricing mechanism across entities worldwide.
• Improve risk management. By formalizing transactions, MNCs can assess and mitigate risk associated with transfer pricing, currency, fluctuations and regulatory compliance. This approach enhances operational stability and minimizes the potential for disputes with tax authorities.
• Transfer pricing, the pricing of goods, services or intellectual property – transferred between related entities within an MNC, benefits companies the most. Leveraging Intercompany as a product allows for aligned transfer pricing policies with the overall business objectives, leading to several underlying benefits:
  1. Enhanced Efficiency & Control: Establishing well defined pricing mechanisms and methodology within the guidelines of an arm’s length agreement leads to greater efficiency in managing Internal transactions, reducing administrative burdens and enhancing control over price decisions.
  2. Improve Compliance: Demonstrate transparency and compliance with transfer pricing regulation. By clearly documenting global process standards, which includes legal agreements, your company provides a stronger defense against potential challenges from tax authorities.
  3. Risk Mitigation: Be proactive with managing transfer pricing risks. By conducting detailed benchmarking studies, companies can ensure that their transfer prices are in line with market standards, minimizing the risk of transfer pricing adjustments or penalties.
  4. Tax Optimization: Strategic use of an end-to-end approach enables MNCs to optimize their tax positions. By aligning transfer pricing policies with value creation and economic substance, companies can be both compliant and tax efficient.

Intercompany as a product offers tremendous value – driving better results to your company’s bottom-line. You want to leverage your finance data regardless of how centralized and decentralized data is within your organization.

We are finally at a point where treating data as an asset is a strategic value proposition for organizations. In recent years, data mesh has popularized the concept of “data as a product.” Now, how do we apply that same concept and synchronize product thinking to Intercompany as a product?

Our recent article “Intercompany as a Product” highlights the product development cycle with a focus on discovery and design. We now have a strategy to improve the maturity of Intercompany, plus solutions like PlaidCloud can get your company started – tame, centralize, standardize and harmonize data that is fit for purpose.

PlaidCloud is the only solution in the market that can facilitate Intercompany invoicing transactions and provide the appropriate transparency and documentation required for transfer pricing compliance. In the global business environment, this concept of Intercompany as a product provides multinational corporations with a powerful tool for optimizing their operations. It unlocks significant transfer pricing benefits including enhanced efficiency, improved compliance, risk mitigation and tax optimization.

As businesses continue to navigate complex international tax landscapes, embracing intercompany as a product can prove instrumental in achieving operational excellence. Step off the “Wheel,” contact PlaidCloud for Intercompany product solutions.