In the last century, ideas appeared in the field of institutional economics that gave rise to a new scientific direction. This direction was received by the theory of transaction costs. The concept of economic transaction, which is basic for institutional economics, was formed much earlier than the consonant concept of transaction from the theory of databases.
What are Intercompany Transactions?
Intercompany transactions are any type of business transaction that occurs between two or more companies. These companies may have some type of affiliation, such as belonging to the same parent company while maintaining their identity, or there may be a buyer / supplier relationship between them. Activities of this type should not be confused with intercompany transactions, which involve the execution of tasks between two or more units that are part of the same operation.
Market and intra-firm transactions form a single end-to-end chain. Although they are very similar, they also have significant differences. Market transactions are governed by institutions:
- social traditions
- legal law.
The starting point for each participant in a market transaction is their property rights. Intercompany transactions are governed by corporate culture and accepted internal corporate standards.
What problems can arise with intercompany transactions?
To be honest, inter-company transactions can provoke a large number of complications (without taking into account the fact whether there is an exchange of goods, cash, or certain operating costs, human resources, etc., there is not much difference). These types of transactions have the ability to specifically confuse accountants, especially if the business owner takes some action to meet the needs of the business at the moment, and, as a result, is unable to report the transaction (about a bank transfer or something like that).
To add more, exchanging large amounts of cash between two different companies can sometimes alarm investors who are involved in due diligence, or bankers who are directly involved in checking financial statements in connection with obtaining a particular business loan.
The Effectiveness of Using VDRs to Improve Security and Productivity
In the modern world, the popularity of virtual data rooms is growing every year, because they can minimize or eliminate common problems that are directly related to intra-company transactions. A wide range of efficient, reliable and versatile virtual data rooms can be found at virtual-dataroom.it. Of course, VDR is not a guarantee that clients registering a transaction are 100% correct or include all the necessary data. But VDRs have the ability to create a specialized audit trail of who entered documents and made certain changes. In addition, it is worth noting that VDR provides a secure way to exchange various files (for example, very common ledger tables and complex invoices).
As a result, thanks to VDR, you have the ability to create a certain specific and at the same time powerful “risk buffer” so that your company does not take full responsibility for cybersecurity.
Intercompany Transactions and Cybersecurity Issues
By the way, some problems can also arise in connection with cash flow and thus significantly reduce profitability. No one will argue that the era of online technology sets its own rules for the implementation of intra-company transactions. Therefore, it is necessary to keep a specialized log of changes when accessing files simultaneously by several employees. In addition, some investment firms and loan officers also need to be able to view files, which can increase cybersecurity risks.