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Leveraging Accounting APIs to Streamline Intercompany Transactions and Financial Consolidations

Nov 15, 2023

The potential uses of an enterprise accounting platform with APIs

Using an enterprise accounting platform with open APIs (Application Programming Interfaces) will streamline processes, enhance data accuracy, and improve efficiency and support multiple use cases for greater flexibility and value. For example, SoftLedger's powerful multi-entity, multicurrency consolidation capability can be powered by API. In this way our customers and partners can:

  • Integrate with multiple source accounting and bookkeeping systems where SoftLedger becomes your consolidation and reporting platform. Integrate as needed - for example, limited to the trial balance level for consolidation.
  • Implement SoftLedger in stages, moving your entities into the enterprise accounting platform when ready. SoftLedger can support full accounting for some entities only, allowing a controlled and step-by-step implementation approach.
  • Integrate with specialist best of breed or in-house specialist subsystems, such as customer relationship management and billing, order management systems, invoice payment and processing solutions, workforce or production, manufacturing and distribution management systems.
  • Integrate with one or more source system(s) to leverage SoftLedger's accounting intelligence to process business transactions into financial transactions (auditable journal lines through draft to posted stage) for consolidation, reporting and analytics - which can be presented through SoftLedger and your own connected user interface.
  • Embed SoftLedger's accounting intelligence behind their user interface for a completely seamless end customer user experience.

Intercompany transactions and financial consolidations

Financial consolidations require appropriate accounting for intercompany transactions. Intercompany transactions include sales, purchases, loans and repayments, transfers of assets, royalties and dividends, allocations, management fees and service agreements.

Leveraging APIs in intercompany accounting

Here are some examples of how APIs can be employed in intercompany accounting:

1. Intercompany Sales and Purchases involve the exchange of goods or services between subsidiaries within the same corporate group.

  • API Use Case: Utilize an API to automate the procurement process from both the buying and selling entity's perspective. The API generates purchase orders and invoices automatically, improving efficiency and accuracy, enabling real-time recording of sales transactions and reducing manual data entry.

2. Intercompany Loans involve lending money from one subsidiary to another or borrowing funds internally within the organization.

  • API Use Case: Implement a loan management API that streamlines loan origination, disbursement, and tracking. This API ensures consistent management of loan terms, interest rates, and repayment schedules across subsidiaries.

3. Intercompany Royalties are payments made by one subsidiary to another for the use of intellectual property, such as patents, trademarks, or copyrights.

  • Use Case: Integrate an API that calculates and processes royalties automatically based on usage data. This API reduces administrative burden, ensures accuracy, and facilitates timely payments.

4. Intercompany Rent or Lease Agreements for properties or equipment between subsidiaries.

  • Use Case: Deploy a lease management API to automate rent payments, lease renewals, and compliance tracking. This API ensures consistent management of lease agreements.

5. Intercompany Management Fees are charges by a central management entity within the group for services provided to other subsidiaries.

  • API Use Case: Automate the calculation and invoicing of management fees based on predefined criteria. This API streamlines the management fee process and ensures accuracy in billing.

6. Intercompany Service Agreements are contracts for services like marketing, IT support, or consulting provided by one subsidiary to another.

  • API Use Case: Implement a service agreement API that automates the creation of service contracts, monitors service delivery, and facilitates invoicing and payment processing, improving efficiency and contract management.

7. Intercompany Cost Allocations involve the allocation of shared costs, such as executive management, shared services departments, corporate level services such as marketing, and research and development expenses, among subsidiaries based on usage or allocation methods.

  • API Use Case: Deploy a cost allocation API that automates the allocation process, reducing manual calculations and errors. This API ensures consistency in cost allocation across subsidiaries.

8. Intercompany Inventory Transfers refer to the movement of tangible or intangible inventory from one subsidiary to another.

  • Use Case: Utilize an inventory management API to automate inventory transfers, update inventory records, and generate accounting entries automatically, enhancing efficiency and accuracy.

9. Intercompany Licensing agreements involve licensing proprietary technology, software, or trademarks between related entities.

  • Use Case: Utilize a licensing agreement API to automate royalty calculations and payment processing, ensuring accuracy and compliance with licensing terms, and streamlining the licensing process.

In each of these use cases, the integration of an open API streamlines the respective intercompany transaction process, leading to increased efficiency, accuracy, and compliance while reducing manual effort and the risk of errors.

Incorporating APIs into intercompany accounting processes can significantly improve accuracy, efficiency, and compliance while reducing the manual effort required for data entry and reconciliation. It also helps organizations adapt to the complexities of managing transactions across multiple entities within a corporate group.

Learn more about SoftLedger APIs

SoftLedger provides enterprise accounting software, with open APIs, that can be used by our customers directly, or by partners to provide their own accounting solutions, including using an white label or embedded approach.

Regardless of how you deploy SoftLedger, we use an API-first approach so that all customers and partners can take advantage of our open APIs to power any workflow, transaction or integration they need. We share our API documentation here.

Contact us to discuss how our API-first approach can meet your requirements. Click here to book an introductory meeting!

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Author
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Ben Taylor
CEO & Co-Founder at SoftLedger

A CPA with more than 10 years of varied public and private accounting experience, Ben has led many complex financial projects to successful outcomes.

He began his career at Ernst & Young, followed by in-house management roles at Fannie Mae and other public companies.

Ben holds a B.S. in Accounting from the University of Maryland.

Frequently Asked Questions

Yes, users have the option to use their own chart of accounts or SoftLedger’s standard chart of accounts when getting started with SoftLedger.  SoftLedger’s flexibility allows users to make changes to their charts by easily adding new accounts.

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