Intercompany transactions include trade and non-trade transactions that occur between entities within the same consolidated group.
Just as with any customer transaction an intercompany transaction requires an invoice document to ensure the transactions are properly recorded, tracked and reconciled.
Intercompany transactions can be grouped into trade and non-trade categories
Trade intercompany transactions:
Involve the sale of goods (products) between entities. These transactions are typically straightforward and are supported by invoices and other payment documentation.
Intercompany transactions are often more complex, harder to document, evidence and track, posing significant challenges for multi-nationals aiming to maintain efficiency and tax compliance.
Non-trade intercompany transactions:
Large organisations often have complex structures with multiple subsidiaries or affiliated entities. These entities may provide services to each other, such as:
- IT support
- management consulting
- rent for office space
These internal transactions are documented through non-trade intercompany invoicing. Often more complex, these transactions can be harder to document, evidence and track, posing significant challenges for multinationals aiming to maintain efficiency and tax compliance. Aico offers a powerful non-trade-specific intercompany invoice solution that makes complex intercompany transactions easy.
Key elements in non-trade intercompany accounting
Intercompany transactions must be accurately recorded to avoid discrepancies in the consolidated financial statements. The types of intercompany transactions include:
Downstream transactions: From the parent to a subsidiary, recorded as a profit or loss by the parent.
Upstream transactions: From a subsidiary to the parent, recorded as a profit or loss by the subsidiary.
Lateral transactions: Between two subsidiaries, recorded based on the nature of the transaction (e.g., services provided).
Proper handling of these transactions ensures no profit or loss is recognised at the group level, maintaining financial accuracy and compliance.
Download Aico’s guide to non-trade intercompany invoicing.
Understand and fix the issues in your non-trade intercompany invoicing workflow.
The challenges of non-trade intercompany invoicing
Manual matching: Matching invoice amounts, reference numbers and posting periods across different company codes can be a tedious and error-prone task, especially for enterprises dealing with high volumes of non-trade intercompany invoices.
Lack of key integrations: Most enterprises will use SAP for non-trade intercompany invoicing, but will often have third-party or custom software to help support their process. This can still involve manually maintaining and uploading Excel spreadsheets.
Disjointed processes: A lack of standardisation in the invoicing process across all subsidiaries can be challenging, potentially leading to unmatched invoices and disputes. Due to the fractured nature of this approach, it is hard to enforce internal controls which can lead to confusion and delays.
Making intercompany invoicing easy
Fortunately, solutions like Aico can automate and streamline the non-trade intercompany invoicing process with live integration to your existing ERP system.
Eliminate matching: Aico books both sides of the transaction simultaneously into your ERP, using the same reference number, the exact same amount, in the same period. Mismatches are eliminated immediately, eliminating the need to reconcile the transactions.
Automated workflows: Eliminate the manual tasks of data entry and matching. Aico’s intercompany invoice solution automates invoice creation, posting, approval and matching, increasing accuracy and efficiency.
Live integration: Live integration into ERPs, such as SAP, is a unique feature of all of Aico’s solutions, and intercompany invoicing is no different. Work with live, up-to-the-minute data across every aspect of your financial close.
Enforce internal controls: Aico’s hyper-configurable workflows allow companies to standardise their intercompany process forcing adherence to internal control protocols, from reference numbering conventions to attaching supporting evidence.
Improve accuracy and time saving: Accurate postings on both sides of the transaction are assured thanks to Aico’s ability to post both sides of the transaction simultaneously with the key data – such as reference number, invoice amount and period – eliminating errors and delays.
Standardise the process: Enforce consistent invoicing practices across all subsidiaries, simplifying reconciliation and reporting.
Greater visibility: Aico provides real-time insights into intercompany activity, enabling global process tracking and informed decision-making.
Crucial, non-trade intercompany invoicing can be time-consuming and error-prone.
Aico offers a powerful solution to automate and streamline this process within your SAP or other ERP system.
With Aico, you can unlock a streamlined, accurate and time-saving non-trade intercompany invoicing process within your group.
Find out how Aico can support your intercompany invoicing process: