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Inter Company – Overview

Overview

This section of the GYDE365 Survey, Inter Company chapter provides questions and content to provide baseline accounting setup that supports Dynamics 365 Finance, Inter Company capabilities.

Questions and content in this section fall under the following headings …

Inter Company Accounting

The Dynamics 365 Finance, Inter Company Accounting capability, primarily supports an inter company recharge type accounting requirement e.g. where costs incurred by a parent company need to be reassigned (recharged) at least in part to one or more related companies, on an inter company basis.

Costs can be recharged cross company as part of a financial journal, typically either within an originating supplier invoice journal or as an adjustment type posting within a general journal.

Dynamics 365 Finance financial journals provide the facility to specify the legal entity as well as the ledger account on each journal line account and/or offset account entry, in effect allowing a single financial journal to be defined that will generate postings across multiple general ledgers, in one. Inter Company Accounting then creates the debit or credit entry to balance each companies general ledger voucher postings.

Note: Inter Company Accounting creates entries to inter company control accounts at a General Ledger posting level. If you have a business requirement to recharge costs on an intercompany basis by invoicing a sales ledger customer account for the related company, that is supported by the capabilities outlined under the ‘Intercompany Sales Ledger and Associated Accounting’ heading.

Centralised Payments

Centralised Payments functionality supports the ability to make supplier payments out of and / or receipt customer payments in to a company bank account accounted for in a different company to that of the purchase ledger and / or sales ledger accounts that the payments are being made to or taken from.

For example, an organisation with three or four legal entities that operate separate purchase ledgers for each of those legal entities, may wish to perform a single payment run to settle outstanding invoices on accounts across all purchase ledgers, with payment being taken from a bank account held by one company e.g. a group or parent company. This functionality supports that business requirement.

Centralised Payments functionality uses extended Inter Company Accounting capabilities with specific settings that determine against which legal entity related postings such as currency exchange gain / loss, settlement discount, interest and fine are to be posted to i.e. legal entity of the invoice being paid, or legal entity where payment is being made from.

Inter Company Sales Ledger and Associated Accounting

Dynamics 365 Finance doesn’t provide any specific inter company functionality to support sales ledger or associated general ledger accounting entries, but the following is recommended setup to support accounting for inter company customer accounts.

Customer Groups: Create a customer group for inter company customer accounts. This will support filtering (and sub-totalling where appropriate) on inquiries and reports to enable inter company accounts to be inquired and reported on discretely if and when required.

Importantly, this also supports the ability to separate and direct GL postings e.g. revenue, cost of goods sold, debtor control to inter company company specific GL accounts if required.

GL CoA (Debtor Control): It is typical GL Chart of Accounts setup to define one or more separate debtor control accounts specifically for inter company customer balances. This can be a single inter company debtor control account, or separate inter company debtor control account for each inter company customer that your company invoices.

Inter Company Purchase Ledger and Associated Accounting

Dynamics 365 Finance doesn’t provide any specific inter company functionality to support purchase ledger or associated general ledger accounting entries, but the following is recommended setup to support accounting for inter company supplier accounts.

Supplier Groups: Create a supplier group for inter company supplier accounts. This will support filtering (and sub-totalling where appropriate) on inquiries and reports to enable inter company accounts to be inquired and reported on discretely if and when required.

Importantly, this also supports the ability to separate and direct GL postings e.g. creditor control to inter company company specific GL accounts if required.

GL CoA (Creditor Control): It is typical GL Chart of Accounts setup to define one or more separate creditor control accounts specifically for inter company supplier balances. This can be a single inter company creditor control account, or separate inter company creditor control account for each inter company supplier that your company receives invoices from.

Summary Information

Intercompany invoicing in Dynamics 365 Finance and Operations is a feature that allows companies within a corporate group to create and process invoices between each other. It streamlines the financial transactions and ensures accurate recording of intercompany transactions.

Here’s an overview of how intercompany invoicing works in Dynamics 365 Finance and Operations:

  1. Intercompany Relationships: Before creating intercompany invoices, you need to establish relationships between the companies involved. This is done by setting up an intercompany organization hierarchy, where you define the relationships and dependencies between the companies.
  2. Intercompany Sales Orders: The process starts with the creation of an intercompany sales order. When a subsidiary company needs to purchase goods or services from another company within the group, they create a sales order specifying the items, quantities, and prices.
  3. Intercompany Posting: Once the sales order is created, it is posted in the subsidiary company’s books. This triggers the intercompany posting process, which automatically generates a corresponding purchase order in the selling company.
  4. Purchase Order Processing: The purchase order is received by the selling company, and they can review, confirm, and process it. The selling company then prepares and delivers the goods or services to the subsidiary.
  5. Intercompany Invoicing: After the goods or services are delivered, the selling company creates an intercompany invoice based on the purchase order. The invoice contains all the relevant details such as item descriptions, quantities, prices, and any applicable taxes.
  6. Invoice Validation: Before the invoice is finalized, it goes through a validation process to ensure accuracy and compliance. This includes verifying the pricing, tax calculations, and any additional charges.
  7. Invoice Posting: Once the intercompany invoice is validated, it is posted in both the subsidiary and selling company’s books simultaneously. This updates the respective financial records and accounts for the intercompany transaction.
  8. Settlement and Payments: Finally, the subsidiary company settles the intercompany invoice by making a payment to the selling company. This could be done through various payment methods such as bank transfers or checks.

Throughout the intercompany invoicing process, Dynamics 365 Finance and Operations provides features for tracking, reconciling, and reporting on intercompany transactions. It ensures transparency, accuracy, and efficient handling of financial transactions between companies within the same corporate group.

Further Reading

Provided below are links to standard Microsoft Docs online documentation content for inter company accounting and centralised payments capabilities.

A link is also provided to inter company accounting e-learning content that includes supporting video content.

Inter Company Accounting

Intercompany accounting in Dynamics 365 Finance – Learn | Microsoft Docs

Intercompany accounting setup – Finance | Dynamics 365 | Microsoft Docs

Centralized Payments

Settlement overview for centralized payments – Finance | Dynamics 365 | Microsoft Docs

Centralized payments for Accounts receivable – Finance | Dynamics 365 | Microsoft Docs

Centralized payments for Accounts payable – Finance | Dynamics 365 | Microsoft Docs