Intercompany accounting can quickly become a thorny issue at month end. When balances don’t reconcile, finance teams often lose valuable time chasing discrepancies and posting manual adjustments. The good news? With the right NetSuite configuration, intercompany processing can be streamlined, automated, and far less prone to errors.
By leveraging the following key NetSuite features, organizations can significantly reduce manual effort and improve accuracy across intercompany transactions.
Key configuration foundations
- Dedicated intercompany accounts: Ensure you have separate accounts for Intercompany Payables and Intercompany Receivables. These should be set up with account types of Accounts Payable and Accounts Receivable, respectively.
- Intercompany framework: Enabling the intercompany framework unlocks core functionality such as cross-charging, fulfillment of inventory on behalf of other subsidiaries, and intercompany netting of mutual balances.
- Automated intercompany management: This feature allows for the automated creation of intercompany sales orders, purchase orders, and period-end intercompany elimination journal entries.
- Enable Automate Intercompany Drop Ship if drop-ship transactions are used.
- Enable Inventory Cross-Subsidiary Fulfillment for cross-subsidiary shipments.
- Representing entities: Representing entities are specially created intercompany customers and vendors. They simplify transaction entry by automatically defaulting key intercompany values.
- Intercompany preferences: Use this setup area to define the following:
- Default intercompany AR/AP accounts (these default intercompany accounts are required to use the auto-balance feature in Advanced Intercompany Journal Entries).
- Cross-charge transfer pricing percentages.
- Default prefixes for representing entities.
Leveraging intercompany functionality
Once configuration is complete, NetSuite’s intercompany tools can be fully utilized:
- Advanced intercompany journal entries: Use representing entities to automatically populate critical intercompany fields and reduce manual entry, as well as use the auto-balance feature.
- Paired intercompany transactions: Pair intercompany customer invoices with vendor bills for cleaner reconciliation.
- Intercompany inventory transfers: Move inventory between subsidiaries using intercompany sales orders and purchase orders.
- Automated elimination entries: Generate elimination entries automatically at month end to support consolidated reporting.
- Intercompany reporting: Use the Intercompany Elimination and Intercompany Reconciliation reports to quickly identify and resolve discrepancies.
- Transaction line distribution: Allocate intercompany charges at the transaction line level (requires Transaction Line Distribution SuiteApp download and configuration).
Final thoughts
While intercompany processing in NetSuite requires careful setup, the payoff is substantial. Once properly configured, intercompany accounting becomes predictable, automated, and far easier to manage, allowing finance teams to close faster and focus on higher-value work at month end.
Interested in learning more about intercompany transactions? Register for our upcoming webinar on intercompany transactions in NetSuite.
