This case study aims to explore the challenges faced by a large hospitality company in handling a significant backlog of intercompany AR and AP invoices. It details the steps taken to identify, address, and resolve the backlog, highlighting the outcomes and lessons learned in the process.
Introduction
Our client, a global hospitality leader managing luxury hotel chains, faced mounting financial risks due to a backlog of 10,000+ unprocessed intercompany invoices. Manual processes, inconsistent policies, and fragmented systems led to delayed reconciliations, cash flow mistakes, and a flawed financial reporting system. With deadlines looming and audits approaching, they turned to KnowVisory Global to eliminate the backlog and future-proof their operations.
The Problem
The client’s accounting system was disparate and flawed. With 50+ properties and a disjointed accounting system, the company failed to handle complex intercompany transactions. Siloed processes, manual data entry, and fragmented tools led to:
- Backlog Chaos: Over 10,000 AR/AP invoices between subsidiaries remained unprocessed, causing balance sheet discrepancies.
- Manual Errors: Spreadsheet-based tracking led to duplicate entries, missed payments, and mismatched reconciliations.
- Cash Flow Strain: Backlog led to tied-up working capital.
- Compliance Risks: The company was at risk of IRS audits and tax penalties.
Decision to Transition
The Challenge
There were multiple issues that demanded immediate attention and firm resolution:
- A huge backlog of over 10,000 inter company AR and AP invoices.
- Discrepancies in financial reporting
- Strained cash flow management.
- Outdated tools and legacy systems that failed to handle transaction volume or multi-currency needs.
- anual workflows that led to inaccuracies in inter company reconciliations and inefficiencies in cash management.
Due to all this, the overall financial health and operational efficiency of the company were at risk, and the client feared an IRS audit and penalties.
The Solution
Seasoned experts at KnowVisory Global followed a two-phased approach: clearing the backlog and preventing its recurrence.
Phase 1: Backlog Cleanup in 90 Days
- Data Centralization
Our team gathered all outstanding invoices from emails, spreadsheets, and legacy ERPs and compiled them into a unified dashboard. - Systematic Categorization
Our experts then categorized these invoices by age, amount, and entity. Invoices were prioritized based on their impact on financial statements and operational urgency. High-priority invoices, such as those affecting cash flow or nearing statutory deadlines, were addressed first. Segmentation helped in breaking down the backlog into manageable chunks. - Team Allocation and Task Management
Specialized teams were allocated specific segments of the backlog. Each team included members from finance, accounting, and IT departments to ensure a comprehensive approach to resolving the issues. Clear roles and responsibilities were defined to avoid overlaps and ensure accountability.
◦ Reconciliation of AR/AP balances at entity and consolidated levels.
◦ Resolving discrepancies via cross-entity collaboration.
◦ Processing 200+ invoices daily using temporary staff for low-complexity tasks. - Real-Time Tracking
A project management office (PMO) was established to monitor progress regularly. Weekly meetings were held to review the status, address bottlenecks, and ensure that the clean-up process was on track. Key performance indicators (KPIs) such as the number of invoices processed and the time taken per invoice were tracked.
- Data Centralization
Phase 2: Process Overhaul & Automation
- AI-Powered Invoice Processing
We implemented an automated invoice processing system to digitize and process invoices, reducing manual errors and speeding up the workflow. - Global Policy Standardization
We standardized policies and procedures across hotel chains to ensure consistency. This included setting clear deadlines for invoice submission and reconciliation. - ERP Integration
Integrated new tools with existing systems (e.g., SAP) to enable real-time reconciliation.
The Result
Conclusion
- The implementation of automated systems and standardized procedures led to a significant reduction in the backlog.
- Immediate Impact
- Backlog Eliminated: 10,000+ invoices processed in 12 weeks.
- Cash Flow Movement: Reconciled balances unlocked trapped cash flow.
- 70% Faster Processing: Automation reduced invoice cycle time from 14 days to 4 days. Long-Term Benefits
- 98% On-Time Processing: Monthly invoices now cleared before deadlines.
- 40% Faster Month-End Close: The company observed quicker month-end closes, more accurate financial reporting, and better cash flow management.
- Audit-Ready: Full visibility into inter company balances ensured compliance.
- Intercompany accounting complexities can cripple even the largest organizations. At KnowVisory Global, we combine technical expertise with years of knowledge to resolve financial crises and build resilient financial operations.