FXBEACON: FOSTERING DEVELOPMENTAL RELATIONSHIPS IN BUSINESS: A HOLISTIC APPROACH
This article is written by GPS Capital Markets My wife loves to explore the world. Anyone who has gone on an adventure with us knows that my wife’s trips are always outstanding. My trips, on the other hand, are usually all about business and developing relationships with people around the world. A few years ago, we visited Notre Dame in Paris. We took a behind-the-scenes tour of the restoration work being done on this magnificent cathedral. The emotion and feelings evoked from seeing this masterpiece cannot be replicated. Only a few weeks later, it caught fire and burned down. My feelings of heartbreak from this personal interaction would not have been the same. If I had not visited and experienced it in person. Working at GPS Capital Markets is for me all about creating true Developmental Relationships in business. It requires being meaningfully connected to current and prospective clients. Even if that means traveling hundreds or thousands of miles to see them. For instance, a few years ago, I was visiting a client in their office. And they had a mountain bike propped up against the wall. As an avid mountain biker myself we were able to develop a close relationship based on mutual interests. This client then took me on a tour of their building. And showed me a map of where they do business around the world. Noticing they did business in China, I asked about the challenges they had doing business there. He had incorrectly assumed they didn’t have options for dealing with CNY currency risk. We were able to customize a very effective plan to help them reduce their risk by millions a year. None of this would have happened without having been there in person. In the ever-evolving business landscape, the importance of Developmental Relationships cannot be overstated. Repeatedly, I have experienced a very fractional relationship approach to sales. They had multiple handoffs from the initial call to implementation and ongoing support. This is especially true in the technology space where a lot of knowledge is required. In order to advise a client on their best course of action. But how does this relate to foreign exchange and our ability to provide a great service to our clients? Let me relate three examples of how and why this works for me. What Is Right for the Client? Okay, I know this sounds trite and everybody says something similar, but here are ways I practice and train our employees with this skill. All of this happens before we start “selling” someone on our tools and services. If you have never met your provider and all they do is sell you more and more risky products, it is not very likely you will have a true partner. Find The Right Partners When choosing a football club to sponsor, it was important to understand who we were doing business with. Partnering with prominent organizations, such as Burnley FC, opens doors to a vast network of professionals and enthusiasts alike. But not all relationships are the same. We met with the owners of the club on multiple occasions to ensure that our end goals and cultures were a good fit. At the end of the day, the people in the organization, and their willingness to help us as a company were deciding factors. These partnerships extend beyond traditional networking events, offering unique opportunities for interaction, and fostering relationships not only within the business community but also among passionate sports fans. Such as the one we co-sponsored to bring together top women leaders in Northern England to hear the inspiring journey of Lola Ogunbote, Head of Women’s Football at Burnley’s Football Club. This also applies to our clients, we don’t just do business with anyone, we are selective about who we do business with. Foster a Culture of Success In the pursuit of organizational growth and success, fostering partnerships with like-minded entities is essential. One such collaboration is a strategic alliance we have with the women’s business community in the UK. They are passionate about creating environments for senior female professionals to connect, meet, collaborate, and create long-lasting professional friendships. This harmonizes nicely with the GPS Capital Markets ‘Women in Business’ Employee Resource Group (ERG) that we established last year. These partnerships align with principles of diversity and inclusion and provide a mutually beneficial relationship. GPS is an organization that specializes in creating bespoke FX solutions for clients, an opportunity to further understand the unique needs of female CFOs and provide tailored FX solutions that aid in the professional success of women in finance. This all works toward a better relationship with our clients. Incorporating partnerships with organizations like Burnley FC into developmental relationships adds a unique dimension to our business growth. In addition to learning how to grow a beautiful turf field and understand the specific needs of women CFOs, these collaborations offer a diverse range of opportunities, from expanding professional networks and enhancing leadership training, to fostering global perspectives. By integrating the strengths of these partnerships, businesses can create a holistic developmental environment that propels them toward sustained success in the competitive business landscape. To return to my initial anecdote, I got to visit Notre Dame this week between meetings and see the progress they have made in restoring it. Feelings of gratitude washed over me, as I appreciated all the opportunities life has given me. Not just to see beautiful things, but the experiences and opportunities to help others achieve their goals in a meaningful, solid, and present way. 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FranklinIntercompany Transactions Guide: Meaning, Management & Strategies
This article is written by Nomentia Intercompany (IC) transactions (or intra-group transactions) are heavily used in the operations of multinational corporations, where financial exchanges between entities within the same corporate group occur frequently. While these transactions offer operational flexibility and efficiency, they also present unique challenges in terms of efficient accounting processes, compliance, and financial reporting. In this blog post, we’ll dig into the intricacies of intercompany transactions and explore strategies for effectively managing them. There will also be a bonus case study on what optimized intra-group payment setups can look like. But first, let’s have a closer look at what IC transactions actually mean and how they work. The meaning of intercompany transactions Despite there being various types of intercompany/intra-group transactions, they can generally be defined as transactions that occur between different entities within the same parent company or corporate group. These transactions can involve the transfer of goods, services, or financial assets between subsidiaries, divisions, or other affiliated entities within the organization. Types of intra-group transactions Intercompany transactions can be categorized into three main types based on the direction of the transaction and the relationship between the entities involved: The categorizations help to understand the directional flow of transactions and the dynamics within the corporate group. Each type of transaction serves specific business objectives and requires careful consideration of factors such as pricing, documentation, and compliance with local regulatory requirements. Examples of intercompany transactions When it comes to the actual transactions themselves, various examples are relevant for finance, accounting, and treasury teams. They illustrate how diverse the nature of intercompany transactions is and how crucial they are for multinationals to function properly. The most common examples of intercompany transactions include: Each intra-group transaction requires a slightly different approach, varying stakeholders, documentation, or compliance. It can be very challenging for companies to manage them efficiently and transparently. How does the intercompany transaction process work? To provide more clarity about the actual work that goes into each example of IC transaction, you can look at the related processes that consist of several steps involving various stakeholders within the organization along the way. How these tasks are divided highly varies in each organization. Yet, you can usually see that the process looks similar to the one below: 1. Identification of intercompany transactions Companies need to identify transactions that occur between different entities within the same corporate group. These transactions may include sales of goods, provision of services, loans, transfers of assets, royalties, or other types of financial exchanges. 2. Recording transactions Once identified, intercompany transactions are recorded in the accounting records of the participating entities. Each transaction is recorded at fair market value, which is the price that would be agreed upon by unrelated parties in an arm’s length transaction. 3. Elimination process The transactions need to be eliminated from the consolidated financial statements to avoid double-counting. When the parent company prepares its consolidated financial statements, it combines the financial results of all its subsidiaries into a single set of financial statements. To ensure accuracy, intercompany revenues, expenses, assets, and liabilities are eliminated during the consolidation process. 4. Intercompany pricing One of the critical aspects of intercompany transactions is determining the transfer price, which is the price at which goods or services are transferred between related entities. Transfer pricing is crucial for tax purposes and to ensure that each entity within the corporate group is fairly compensated for its contributions. 5. Documentation and compliance Companies must maintain proper documentation of intercompany transactions to comply with accounting standards, tax regulations, and transfer pricing rules. This documentation typically includes intercompany agreements, invoices, pricing policies, and other relevant records. 6. Tax implications IC transactions can have significant tax implications, especially when they involve entities in different tax jurisdictions. Tax authorities scrutinize the transactions to ensure they are conducted at arm’s length and that transfer prices are set in accordance with regulations to prevent tax evasion and profit shifting. 7. Risk management Managing risks associated with intercompany transactions is crucial. Companies need to ensure compliance with regulations, mitigate transfer pricing risks, and maintain transparency in their financial reporting to avoid legal and financial repercussions. It is clear that IC transactions play a vital role in the operations of multinational corporations, facilitating the efficient allocation of resources, sharing of expertise, and coordination among different entities within the corporate group. Simultaneously, it’s a time-consuming process that requires many steps, stakeholder management, and documentation. Let’s zoom in on the documentation aspect further, since that’s where companies can optimize processes in particular. Documentation is a critical part of managing IC transactions Traditionally, intercompany transactions are documented through various means to ensure proper record-keeping, compliance, and transparency within the corporate group. Some common documentation methods include: Intercompany agreements: formal agreements that are drafted to outline the terms and conditions of intercompany transactions. These agreements specify the nature of the transaction, pricing mechanisms, payment terms, and any other relevant provisions. Invoices and billing statements: invoices are issued for goods sold, services rendered, or other transactions conducted between entities within the corporate group. These invoices detail the quantity, description, price, and total amount due for the transaction. Transfer pricing documentation: transfer pricing documentation is prepared to support the pricing of intercompany transactions in accordance with applicable tax regulations. This documentation typically includes a transfer pricing study, analysis of comparable transactions, and documentation of the pricing methodology used. Accounting records: each intercompany transaction is recorded in the accounting records of the participating entities. These records include journal entries, ledgers, and other financial documents that capture the details of the transaction for internal and external reporting purposes. Intercompany reconciliation: there need to be regular reconciliation processes in place to ensure that intercompany balances and transactions are accurately recorded and reconciled between the entities involved. This helps identify and resolve any discrepancies or errors in the accounting records. Even if this documentation process sounds labor-intensive, there are ways to make it more efficient, for example, by adopting dedicated tools. Other improvements and strategies we’ll discuss more in detail below. Strategies…