A Comprehensive Guide For Mastering Intercompany Transactions in NetSuite

Managing financial transactions across multiple subsidiaries and business units within a global organization can be complex and challenging. NetSuite, a leading cloud-based ERP system, offers a robust solution for handling these intricacies through its intercompany transaction features.

Whether you’re dealing with intercompany sales, expenses, or transfers, mastering the tools and processes in NetSuite can significantly streamline your financial management. In this guide, we’ll explore what intercompany transactions in NetSuite are, the features available to manage them, and how to execute intercompany journal entries effectively.

What are Intercompany Transactions in NetSuite?

Intercompany transactions in NetSuite refer to financial activities between different entities or subsidiaries within the same parent organization. These transactions can include sales, expenses, transfers of goods or services, and loan agreements. The key challenge with intercompany transactions is ensuring that they are accurately recorded and reported in each subsidiary’s financials accurately. NetSuite simplifies this process by providing tools that automate and standardize intercompany transactions, reducing the risk of errors and ensuring compliance with accounting standards.

Features of NetSuite to Perform Intercompany Transactions:

NetSuite offers several features designed to make intercompany transactions seamless and efficient. These features are integral to maintaining accurate financial records across multiple entities:

Automated Intercompany Sales and Purchases: NetSuite allows you to automate sales and purchase transactions between subsidiaries, ensuring that both sides of the transaction are recorded simultaneously in the respective entities’ books. This automation reduces manual data entry and the potential for discrepancies.

Intercompany Accounts Receivable and Payable Management: NetSuite provides tools to manage intercompany accounts receivable (AR) and accounts payable (AP) transactions. This feature ensures that payments and receipts are accurately tracked and reconciled between subsidiaries.

Consolidation and Elimination: NetSuite facilitates the consolidation of financial statements by automatically eliminating intercompany transactions that cancel each other out, preventing double counting and ensuring accurate consolidated reports.

Currency Management: NetSuite supports multi-currency transactions, which is particularly useful for global organizations. The platform handles currency conversions automatically, ensuring that all subsidiaries report transactions in their local currencies while maintaining consistency in the parent company’s reporting currency.

What are Intercompany Journal Entries in NetSuite?

Intercompany journal entries in NetSuite are a specialized type of journal entry used to record financial transactions between different subsidiaries within the same organization. These entries ensure that both sides of a transaction are accurately reflected in each subsidiary’s financial records. For example, if one subsidiary provides a service to another, an intercompany journal entry would record the expense in the receiving subsidiary’s books and the revenue in the providing subsidiary’s books.

How to Do Intercompany Journal Entries?

Creating intercompany journal entries in NetSuite involves several steps, but the process is designed to be intuitive and effective. Here’s a basic overview of how to execute these entries:

1. Access the Journal Entry Module: Start by navigating to the journal entry module in NetSuite. This is where you’ll create and manage your intercompany transactions.

2. Select the Subsidiaries: Choose the subsidiaries involved in the transaction. NetSuite will automatically create the necessary entries for each subsidiary based on the data you input.

3. Enter the Transaction Details: Input the details of the transaction, including the accounts affected, the amounts, and any applicable tax codes. NetSuite allows you to split the entry across multiple subsidiaries, ensuring that each entity’s financials are accurately updated.

4. Specify Currency and Exchange Rates: If the transaction involves multiple currencies, NetSuite will prompt you to specify the currencies and exchange rates. The platform handles the conversion automatically, ensuring consistency across all entities.

5. Review and Submit: Once you’ve entered all the details, review the journal entry to ensure accuracy. After confirming that everything is correct, submit the entry. NetSuite will update the financial records of each subsidiary accordingly.

6. Reconciliation: After the journal entry is posted, NetSuite provides tools for reconciling intercompany accounts, ensuring that all transactions are balanced and correctly recorded.

What is PowerGL and How Can It Help Businesses in Intercompany Transactions?

PowerGL is a NetSuite-native app and custom GL plugin for NetSuite designed to improve the management of accounting processes. It facilitates the accurate redistribution of transaction GL postings, which helps ensure precise financial reporting. The application features user-friendly, no-code templates that allow businesses to adjust postings with ease, reducing the potential for errors.

By automating transaction reposting, PowerGL enhances the efficiency and reliability of accounting practices, particularly in the context of intercompany transactions, where accurate and timely financial adjustments are crucial.

To Conclude

Whether you’re new to NetSuite or looking to optimize your use of the platform, mastering intercompany transactions is a crucial step in achieving financial excellence. Understanding how to effectively manage these transactions will not only improve your organization’s financial reporting but also enhance overall efficiency.

We are Power Cloud Consulting, a leading Oracle NetSuite alliance partner, dedicated to delivering top-quality NetSuite consulting services and innovative solutions. Our product, PowerGL enhances your current NetSuite system by adding advanced functionality, making it more productive and effective for your business.