Do you have more than one company under your business umbrella? If so, you need to be able to keep track of transactions between one and another. Can your accounting software track more than one company? It can if you are using Microsoft Dynamics 365 or software like Gravity Accounting that works off of a Dynamics 365 platform. One of the basic tasks that Dynamics 365 Business Central easily handles is setting up intercompany transactions. Here is how it works.
You can make it so transactions like a sales journal entry made at one company will automatically be created in another company. For this to happen, there are two things that need to match from one company to the other. There must be agreement on common charts of accounts and the dimensions to be employed for transactions between companies.
A common and workable approach is to have the intercompany chart be a simple version of the chart of accounts used by the parent company. Each company will then map their own chart of accounts to match the intercompany chart and dimensions.
There also needs to be a partner code to which all companies agree. Vendor and customer cards can then be entered in the Partner Code Field.
Items in intercompany lines can be handled by using one or the other company’s item numbers in the Vendor Item No. field or by using the Cross Reference function you can map your item numbers to the intercompany partner’s line item descriptions, open the item reference card, and use the Cross Reference action to set up each cross-reference between an item reference and the corresponding item description of the partner company.
In this case, it is necessary to enter information on the IC Partner Purch. G/L Acc. No. field for every resource involved. This will have the number that corresponds to the intercompany general ledger account and will be posted in the partner company as well.
Once your companies are able to communicate you can begin setting up intercompany transactions.
Start by clicking the Lightbulb which opens the Dynamics 365 Tell Me feature icon. Enter your company information and click the associated link. Enter the necessary information for the Intercompany Partner code, Intercompany Inbox Details, and Intercompany Inbox Type. If need help at any point, you can read a brief description by hovering over any given field.
Click the Lightbulb to see the Tell Me feature, put in Intercompany Partners and click the associated link
Choosing a New Action
Simply go to the Intercompany Partner page and fill in the appropriate fields.
Setting Up Intercompany Customers and Vendors
Click the Lightbulb to open Tell Me, put in the vendors and pick the associated link. Or, start on the Intercompany Partner page, Vendor No. field to get the vendor.
In either case, open the card for the intercompany partner vendor. (You can find more info under Register New Vendors.
Choose the related intercompany partner code in the Intercompany Partner Code field.
Now repeat all four steps for customers.
The most common approach for setting up intercompany transactions is to start with the chart of accounts of the parent company and create a simplified version to use as the intercompany chart of accounts. Export this chart of accounts from the parent company via an XLM file and send it to each of the subsidiary or partner companies. This way the companies all agree on a common chart of accounts as a reference and account numbers that match.
For the parent company, follow the procedure to Set Up the intercompany charts of accounts.
Subsidiary and partner companies will need to import the necessary XML file that has the chart of accounts that needs to be common to all companies. Follow the procedure to Import it.
To do this start at the Lightbulb and Tell Me feature, put in Intercompany Chart of Accounts and pick the associated link.
When you get to the page for the Intercompany Chart of Accounts, enter each account on its own line.
If you have planned ahead and the intercompany chart of accounts is the same as or very similar to your own chart of accounts, you only need to choose to Copy from Chart of Accounts.
Start with the Lightbulb and Tell Me feature icons. Put in Intercompany Chart of Accounts and pick the associated link.
When the Intercompany Chart of Accounts page opens, pick the Export function and then click Save.
Choose a file name and the location where you wish to save your XML file and click the Save button.
Each subsidiary or partner company will need to import the defining chart of accounts for intercompany transactions. They will want to make certain that they have the same accounts.
Start with the Lightbulb and Tell Me icons and put in Intercompany Chart of Accounts and choose the associated link.
Pick the Import action on the Intercompany Chart of Accounts page.
The Chart of Accounts page will be full and edited G/L account lines as dictated by the intercompany chart of accounts within the file. You will leave any unrelated, pre-existing lines unchanged.
Once you have imported the agree-upon intercompany chart of accounts, each intercompany general ledger accounts needs to be associated with one of the general ledger accounts for your own subsidiary or partner company.
How translation occurs for intercompany general ledger accounts for incoming transactions into your own chart of accounts is set up on the IC Chart of Accounts page.
You will be able to do the mapping automatically if the intercompany chart of accounts and your own have the same account numbers.
Start with the Lightbulb and Tell Me feature icons, put in Intercompany Chart of Accounts and pick the associated link.
In this case, pick the lines that you can map automatically and pick the Map to Acc. With Same No action.
And, you need to fill in the Map-to G/L Acc No. field for every intercompany general ledger account that cannot be automatically mapped.
If at any step of the way, you need a bit of help, feel free to contact us at Exigo Business Solutions for assistance.
You will automatically create a default account by creating an intercompany purchase line or sales line as an outgoing transaction. For accounts that you use often on the Chart of Accounts page, you can specify the default intercompany ledger account. It is very efficient and lets you do things like enter matching payables accounts from your intercompany chart of accounts. When this is set up, entering a general ledger account in your Bal. Account No. field in the intercompany account, the IC Partner G/L Account field fills in automatically
To do this, start with the Lightbulb and Tell Me features and choose Chart of Accounts. Simply pick the related link.
On the G/L account which is used for your intercompany transactions, go to the Default IC Partner G/L Account field that you use for intercompany transactions. In the Default IC Partner G/L Account field, put in the correct intercompany ledger account which the partner company will post to after you post in the general ledger account.
Repeat this second step for every account that you frequently enter in the Bal. Account No. field on a line on an intercompany document or journal.
In order to exchange transactions that have dimensions linked to them, you need to agree on the dimensions to use. The most common approach is for the parent company to export their dimensions an XML file. Each subsidiary imports this into their Intercompany Dimensions page and then maps these intercompany dimensions to those in their own Dimensions page.
The parent company will use the “To define the intercompany dimensions procedure. Subsidiaries will work from the imported XML file using the To import intercompany dimensions procedure.
To do this, go to the Lightbulb and Tell Me icons and enter Intercompany Dimensions. Pick the associated link.
You will enter each dimension on its own line on the Intercompany Dimensions page.
This can be done automatically if the dimensions are identical or sufficiently similar. In that case, use the Copy from Dimensions action and edit the lines as needed.
Exporting and importing intercompany dimensions is done using an XML file from the parent company. Do the mapping on the intercompany dimensions page. As with other functions, the more similar (or identical) your codes are, the more likely it will be that you can do the mapping automatically. And, for any codes that do not automatically map, use the Map-to-Dimension Code field.
Tracking Intercompany Transactions with Dynamics 365
Successful businesses in the modern world use business intelligence tools like Microsoft Power BI (included in Dynamics 365) and others. Dynamics 365 takes this a step or two farther by helping integrate multiple companies that work under the same business umbrella. This can include a parent company and subsidiaries or a company and its partners. Learning how to set this up takes your business a lot farther along the road to increasing success and profits. Talk to us at Exigo Business Solutions to see how Dynamics 365 can help your business and how to set up tasks like tracking intercompany transactions.