Many growing businesses separate operations into different legal entities or divisions.
One entity sells products.
Another provides installation, maintenance, or professional services.
On paper, this sounds clean.
In reality, we often see something very different.
The product company usually collects most customer payments and therefore holds most of the cash. Meanwhile, the service company incurs labour costs, travel expenses, subcontractor invoices and overheads.
Because cash sits in one entity while costs arise in another, finance teams start paying expenses from whichever account has money available.
A service salary is paid from the product company’s account.
A customer pays for installation into the product account.
A supplier invoice belonging to one entity is settled by the other.
Every one of these transactions creates an intercompany balance.
At first, this seems harmless.
Over time, hundreds of intercompany entries accumulate, creating:
- Time-consuming reconciliations
- Unclear cash visibility
- Complex month-end close processes
- Tax and transfer pricing considerations
- Increased audit effort
- Greater risk of posting errors
Ironically, the business created separate entities for control—but ended up creating more administration.
So what are the alternatives?
There is no one-size-fits-all answer. The right structure depends on commercial, tax and legal requirements.
However, businesses typically consider several approaches.
Option 1 – Align cash receipts with the operating entity
Where practical, customer receipts and supplier payments should flow through the entity that owns the transaction.
This naturally reduces intercompany activity.
Option 2 – Operate a central treasury model
Instead of allowing ad hoc payments between entities, designate one company as the treasury centre.
All funding between entities follows a documented policy with scheduled settlements rather than hundreds of operational transfers.
Option 3 – Introduce regular intercompany settlements
Rather than allowing balances to grow for months, reconcile and settle intercompany accounts weekly or monthly.
This keeps balances manageable and improves financial visibility.
Option 4 – Review whether separate bank accounts still serve a purpose
Many businesses establish additional accounts or entities as they grow but never revisit whether the original rationale still exists.
Sometimes the administrative cost now exceeds the operational benefit.
The real objective isn’t fewer bank accounts.
It’s reducing unnecessary financial complexity.
The best cash structures allow businesses to maintain control while keeping accounting, treasury and reporting as simple as possible.
If your finance team spends significant time reconciling intercompany balances every month, the problem may not be your accounting process—it may be your cash flow design.
At Merzaai, we regularly review finance operating models to identify where cash movements, banking structures and operational processes create hidden inefficiencies. Often, relatively small structural changes can eliminate hours of manual work while improving cash visibility across the business.