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What is loan account automation?

Now that you know all about intercompany loan accounts, it’s time to reveal the unfortunate truth: they can easily fall out of balance. There are three reasons that this might happen. 

Loan account automation prevents all three of those reasons, ensuring that intercompany loan accounts will never again fall out of balance. Read on to discover what these reasons are and how loan account automation works. 

Reason 1 - posting asymmetry

A loan of 10,000 from Entity A to Entity B may correctly be posted to the loan account in Entity A. But then incorrectly posted as income in Entity B.

Loan account automation matches the transactions in Entity A’s loan account to those of Entity B. It flags any discrepancies so that posting asymmetries can be easily identified and rectified.

Reason 2 - foreign exchange

A £100,000 loan from Entity A (a UK company) to Entity B (a US company) equated to $125,000 when the loan was made. It was decided that this was a GBP loan. Exchange rates have changed so that £100,000 now equates to $130,000. The £100,000 loan and $125,000 liability will no longer net to nil on consolidation. Entity B needs to post a $5,000 foreign exchange loss so that they do.

Loan account automation pulls the relevant foreign exchange rates and enables one-click posting of the relevant foreign exchange gain or loss.

Reason 3 - interest

Where interest is being charged on loan account balances, it needs to be correctly calculated and posted.

Loan account automation enables the relevant interest rates for the loan to be set with one click posting of the relevant interest amounts to each entity.

Without loan account automation, intercompany loans can easily fall out of balance and finance teams must face the time-consuming task of unravelling transactions to find the culprit and rebalance the accounts. Mayday Balancer’s loan account automation ensures that never again will your intercompany loan accounts fall out of balance. 

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