Intercompany: the basics

If you have several companies in the same group, they often trade with each other. Without intercompany, both parties must post the same thing twice. Business Central can create the corresponding document or journal line at the partner. Here is what you need to set up, how the inbox and outbox work, and what Learn writes about limitations. We only go through the standard functions. It is a short introduction to the topic.

What intercompany does

You assign an intercompany partner code to a customer or vendor. Orders and invoices between the companies then produce corresponding documents at the partner. Posting and dimensions are translated through an intercompany chart of accounts and intercompany dimensions. This applies to sales and purchase documents as well as general journals. Between the companies, currency, chart of accounts, dimensions and item numbers can differ.

The benefit is fewer errors, because data is entered once. Learn also mentions a clear audit trail and a better overview of the transaction history between the companies.

Setup

You need to create a list of intercompany partners, an intercompany chart of accounts and intercompany dimensions. The Intercompany Setup page brings together partners, chart of accounts and dimensions and gives quick access to the tasks. Microsoft's release plan for 2023 release wave 1 describes it as a unified setup experience. After that you can post in the intercompany general journal.

Start with the partner list and the chart of accounts. Map each account in your own chart of accounts to an intercompany account, so the counterparty gets the right posting. Do the same with dimensions before you post the first transaction.

Inbox and outbox

When you post an intercompany document or a journal, the transaction ends up in the outbox (Intercompany Outbox Transactions). Here you send it to the partner with Send to Intercompany Partner, or you can return it to your own inbox with Return to Inbox. Using Cancel requires that you post a correction to the original transaction.

At the receiver, the transaction is in the inbox (Intercompany Inbox Transactions). You can accept, reject (return to the partner) or cancel. If you accept, document or journal lines are created, which you check and post. If a transaction has been rejected by the partner, you must cancel it in the inbox and post a correction.

Make it a fixed routine to empty the inbox and outbox. Transactions that stay behind cause differences between the companies' intercompany balances, and they are hard to find again at the end of the month.

Automatic processing

If the partners are in the same database, transactions can be accepted automatically and go directly to the handled inbox and outbox. This is controlled by the Auto. Send Transactions field on Intercompany Setup for the synchronising partner and Auto. Accept Transactions on the partner card. Importing a transaction file from a partner outside the same database is described by Learn as applying only to on-premises installations. How you connect companies across environments in Business Central online, you need to check on Learn.

If you use automatic accept, you should still have a control. Review the pages with handled transactions, so errors do not stay hidden.

Limitations and control

Learn mentions that purchase invoices are not sent to partners through intercompany, but that a sent sales invoice is created as a purchase invoice at the receiver. The general journal does not contain currency and converts amounts to local currency at the rate of the day.

The Intercompany Transactions report gives an overview of sent and received transactions in a period. Process all pending transactions as part of the month-end close, so intragroup balances can be reconciled.

Use a test transaction between two companies before you go live, and check that both sides post as you expect.

Consolidation and rules

Intercompany is not the same as consolidation. Consolidation of group accounts is a separate function. How internal transactions are to be handled in the group accounts, and which requirements apply to intragroup balances, follows your local rules, so agree it with your auditor.

Give each partner an owner, so the inbox and outbox do not end up owned by everyone and thus by no one.