Author: Crystal Ahrens

Working with multiple companies requires an efficient way to manage internal transactions, and that’s why intercompany sales are an excellent solution. In this post, we’ll be discussing how intercompany sales work in D365FO and explore the real-world business processes that benefit from this functionality. This feature makes the process quicker, error-free, and automated. Let’s dive into how your organization can utilize intercompany transactions to streamline its business processes.

Intercompany Trade Relationships in D365FO

Intercompany trade relationships in D365FO are integral to maintaining a streamlined flow of transactions between associated companies. They manage the exchange of goods or services and the corresponding financial entries for these exchanges. To establish these relationships in D365FO, you first identify the trading partners – a selling legal entity and a buying legal entity. Then, you set up corresponding customers and vendors in each entity, linking them with an ‘Intercompany chain’. This chain denotes the relationship between a customer in the selling entity and a vendor in the buying entity, and vice versa. Creating this relationship allows D365FO to automatically generate corresponding purchase orders, sales orders, or invoices in the linked entities when an intercompany transaction is initiated. By defining these relationships, businesses can ensure accurate, efficient, and automated intercompany trading in D365FO.

Benefits of Using Intercompany Sales in D365FO

Implementing intercompany sales in D365FO offers several benefits to organizations, including:

• Simplification: Intercompany sales streamline the process of internal transactions by automating and tracking them through the established hierarchy. This allows businesses to focus on other core activities without worrying about the details of each transaction.
• Efficiency: With intercompany sales, businesses can eliminate the need for manual entry and paper-based processes. This reduces the risk of errors and speeds up the transaction process, leading to increased efficiency.
• Accuracy: By maintaining a centralized database, D365FO ensures that data is consistent across all entities involved in an intercompany trade. This eliminates discrepancies and improves the accuracy of financial reporting.
• Cost Savings: Intercompany sales eliminate the need for creating separate purchase orders and invoices for each entity, reducing administrative costs and saving time.

Real-Life Applications of Intercompany Sales

Intercompany sales are a valuable feature for businesses with multiple entities that engage in frequent internal transactions. Some practical applications include:

1. Consolidation of Financial Statements: Intercompany sales allow businesses to consolidate financial statements for all entities, providing a complete and accurate view of the organization’s performance.
2. Inventory Management: By utilizing intercompany sales, organizations can efficiently manage inventory across multiple entities by automatically generating transfer orders when stock levels are low in one entity but high in another.
3. Subsidiary Transactions: Intercompany sales are especially beneficial for organizations with subsidiaries that operate in different regions or countries. This functionality enables them to easily conduct transactions between these subsidiaries, eliminating the need for complex and time-consuming processes.

Establishing Trading Relations

To facilitate intercompany trade between customers and vendors, follow these steps:

1. Configure intercompany parameters for customers and vendors: Accounts Receivable > Customers > All customers.
2. Select a customer account.
3. On the Action Pane, click on the General tab and choose Intercompany.
4. Specify intercompany setup parameters for the customer account, including the corresponding vendor’s legal entity and vendor account. Define policies for purchase orders, sales orders, value mapping, and agreements. Decide whether to use base data values from the customer or vendor account in the other legal entity.
5. Repeat steps 2-4 for the remaining intercompany customers.

1. Proceed to Accounts Payable > Vendors > All vendors.
2. Select a vendor account.
3. On the Action Pane, click on the General tab and select Intercompany.
4. Specify intercompany setup parameters for the vendor account, including the corresponding customer’s legal entity and customer account. Define policies for sales orders, purchase orders, value mapping, and agreements. Decide whether to use base data values from the vendor or customer account in the other legal entity.
5. Repeat steps 1-5 for the remaining intercompany vendors.
6. Configure products for intercompany trade:

1. Configure products for intercompany trade:

a. Go to Product Information Management > Products > All products and product masters.

b. Define products accessible to the legal entities where you wish to engage in intercompany trade.

By following these instructions, you can efficiently configure intercompany settings for your customers and vendors.

Pitfalls of Intercompany Sales

While intercompany sales bring numerous benefits to the process, there are instances when not to use them. For example, if the parent company does not own 100% of the subsidiary company, there’s a possibility of incurring losses. Additionally, intercompany sales require the presence of legal entities, which can be a cumbersome process for small businesses or startups. It’s essential also to note that intercompany sales incur a slight overhead cost which can be avoided in small transactions.

In conclusion, Intercompany sales in D365FO simplify the process of managing multiple entities by streamlining business processes. This functionality enables organizations to automate internal transactions, reducing manual errors, and saving time. While intercompany sales are great for big corporations that have established entity hierarchies, caution should be taken not to forcefully implement the functionality where it’s not needed. Nevertheless, D365FO and intercompany sales are a powerful combination and should be utilized where applicable. Overall, utilizing intercompany sales in D365FO helps your organization save time and resources while improving the accuracy of your accounting records.