The Behind-the-Scenes Story of IKEA’s Multi-National Expansion

IKEA has become one of the best-known retail brands in the world by offering a wide range of well-designed, functional home furnishings at affordable prices. Today it’s also the hallmark of a successful globalization story of a company that has been able to rapidly expand across borders worldwide – but what was happening behind-the-scenes as the brand was making the leap to the worldwide stage? How did the company ensure its accounting and finance system could support its expansion goals? That’s the story behind the story.

With a rapid rate of expansion into new countries and markets, the company faced the challenges of multiple languages, operating systems, processes and technology – with various countries operating their own separate finance systems and collecting different types of data. The parent company of the retail franchises, Inter IKEA Systems BV, recognized the importance of technology in finance and accounting to support its business goals– and was determined to streamline and standardize its accounting processes across all countries, stores and finance departments.

Here’s a look into some of the successful finance best practices implemented by this world-class retailer:

• Create one finance system. IKEA decided to consolidate all of its accounting systems into one common financial system worldwide, making accounting processes quicker and easier. By implementing a single-instance application that could be accessed from anywhere, the finance departments were able to easily accommodate the company’s eventual transition to a shared service model.
• Access needs to be open and easy. IKEA set up a web-browser version of the financial software so, for example, performance information in a particular country can be accessed easily by all.
• Design a single format for the global Chart of Accounts. By having a common Chart of Accounts (COA), the same type of information could be compared in all countries across the system.
• Make sure you are getting real-time information. IKEA implemented a standard COA that updates information in real time from IKEA’s operational system – giving each store on-demand access to actual, up-to-date performance data.
• Easy, seamless integration is key. By using a robust architecture that integrates source systems, integration is seamless and reports are more accurate than if they were entered manually. IKEA also easily integrates the accounting system with others, including merchandizing and inter-company invoicing, a solution measuring B2B sales, freight invoicing, a system handling travel expenses and payroll.
• Make sure the accounting system offers multi-everything support. IKEA’s accounting system was able to support its needs worldwide because it can accommodate multiple languages – as well as currencies, taxes, regulations, etc.
• Plan for the system to grow with business needs. Despite the fact that IKEA’s accounting system was first implemented in the 1990′s, its flexible, robust structure and continual technology advances have kept up with IKEA’s business needs as the company rapidly expanded worldwide and implemented a shared services structure.

By implementing best practices and a robust accounting system with multi-everything capabilities, IKEA was able to get the speed, efficiency, agility and business insights it needed. Along with the company’s great concept and quality merchandise, IKEA’s accounting practices and systems have helped the company to execute well on its multinational business model.