RSMUS.comHow do intercompany transactions work in Business Central?
I decided to write this blog, as several people have asked how the intercompany transactions work in Business Central.
The functionality of Intercompany allows for processing of transactions from each entity (busines unit/company) with each other in the same manner as you handle transactions with external vendors and customers. You will be able to enter a sales or purchase document once and have the applicable documents created in the other entity (business unit/company). It is the same process as creating these documents for your other customers or vendors. However, when this posting occurs, a corresponding transaction is created in the originating company’s intercompany outbox that is transferred to the receiving company’s intercompany inbox.
First of all, in order for Intercompany transactions to work, the companies must have a common chart of accounts and set of dimensions for use on the intercompany transactions. You can build this intercompany chart of accounts and dimensions as a condensed version of the parent company chart of accounts and dimensions. Each entity (business unit/company) then maps their full chart of accounts to the shared intercompany chart of accounts. They would also map their dimensions to the intercompany dimensions.
It is also necessary to set up intercompany and create Intercompany Partner codes for each entity (business unit/company). For example, if I have Cronus USA and Cronus Canada, I would need to create the Intercompany Partner in Cronus USA that connects to Cronus Canada. The IC Partner is in Cronus USA but referencing Cronus Canada. I would also need to create the Intercompany Partner in Cronus Canada that connects to Cronus USA. The IC Partner is in Cronus Canada but referencing Cronus USA.
You could also have a situation where you have an additional company (say Cronus UK) that may have a need to have intercompany to Cronus USA & Cronus Canada. You would build out intercompany partners for each.
When you set up Intercompany, you also indicate if you want to Auto Send the transactions. The Auto Send specifies that as soon as transactions arrive in the intercompany outbox, they will be sent to the intercompany partner. This set up also updates the IC Partner Code on the Company Information page.
You can the set up the Intercompany Partner code for each of the entities (business units/companies) and assign them to customer and vendor cards respectively by completing the Intercompany Partner code field. You might also consider creating different Customer and Vendor Posting Groups for these customers and vendors so that they post to intercompany due to or due from accounts rather than your trade accounts receivable or trade accounts payable accounts. It is in the Intercompany Partner codes that you can also specify if you want to Auto Accept Transactions. This is similar to the Auto Send in the set up, but on the receiving side.
When you set up the customer, you would indicate on the Customer Card in the General FastTab the IC Partner Code. Similarly, you would set up a vendor in the same fashion. Vendor Cards also contain the IC Partner Code on the General FastTab. Another consideration is the Items. If they are different, then you might want to set up Item Cross Reference to map the item numbers to the intercompany partners.
You can then create sales documents to post transactions to your intercompany partners. When you post an intercompany document in the originating company, a corresponding purchase document is created in the intercompany outbox that you can transfer to the receiving partner. It will go to the handled outbox if you configure the intercompany setup to auto send transactions.
The partner (receiving entity) can then post the purchase transaction in the receiving company, without having to re-enter the data.
The intercompany partner code on the involved customer or vendor ensures that all orders and invoices generated pertaining to transactions with these companies will produce corresponding documents in the partner company, resulting in correct balancing of the accounts for the sales and purchase documents.
You can also create purchase documents in the same manner. These will also post transactions to your intercompany partners. As you create and post an intercompany purchase document in the originating company, a corresponding sales document is created in the intercompany outbox that can then be transferred to the partner. It will go to the handled outbox if you configure the intercompany setup to auto send transactions. The receiving partner (entity) can then post the corresponding sales transaction in the receiving company, without having to re-enter the data.
Of course, the destination of each of these transactions is dependent on the configurations in the Intercompany Setup. The transaction will either reside in the Intercompany Inbox or in the Handled Intercompany Inbox. These can be incoming transactions from sales, purchasing or journals. They could even be transactions that were rejected or cancelled in the other company. The same is true with the Intercompany Outbox. Transactions will either reside in the Intercompany Outbox or in the Handled Intercompany Outbox.
Of course, you can also use intercompany journals to post transactions with your intercompany partners. When you create and post an intercompany journal line in the originating company, a corresponding journal line is created in your intercompany outbox that can be transferred to the receiving partner. The partner (receiving entity) can then post the corresponding transaction in the receiving company, without having to re-enter the data.
When creating the intercompany general journal lines, you don’t necessarily need to stipulate the accounts for an individual set of books. You only give the identification of the partner company. Corresponding intercompany general journal lines are then created in the partner company that result in the balancing of the books of both companies involved in a transaction.
This blog was originally posted on dynamics-discussion.com
