With the global regulators and the ATO implementing increasingly onerous inter-country tax requirements and closely monitoring reconciliation processes, it will be essential for accounting firms to automate these tasks to avoid mistakes, says one firm.
Global regulators to scrutinise reconciliation processes
At a Sydney event, BlackLine founder Therese Tucker said the very specific regulations around the movement of money in and out of certain countries require firms to have sequentially numbered invoicing and other types of reports.
“There are a lot of different kinds of inter-company transactions that companies do, and they are tied to different types of agreements that tie back to things like tax issues,” explained Ms Tucker.
“It actually gets very complex when companies have hundreds of entities and multiple disconnected enterprise resource planning (ERP) systems, and what we have found is that most companies don’t have a single place to put all their transactions through.”
Ms Tucker said this means companies have to compile all their reports that are country-based manually, and the settlement process ends up being last-minute and manual.
This, she said, hampers the ability of companies to properly meet inter-country tax requirements, which are “very onerous at the moment”.
“I actually had one bank say to me that they had several billion inter-country transactions that they had been unable to locate, and they were trying to explain that to their auditors,” she said.
“Some of our larger clients have several hundred ERPs; how do you have any idea what’s going on? And I know that there’s consolidation systems out there, but they are consolidating at the very last minute to try and minimise timing issues.”
Ms Tucker said the ATO and global regulators are closely monitoring these reconciliation processes to ensure they are done properly and that accounting firms “understand the risks associated with not doing something about it”.
Speaking at the same event, Toga group financial controller Michael Gowing said there have certainly been issues with reconciliation on the regulatory side, where companies have been fined for not having their reconciliation worked out properly.