The NetSuite Intercompany Time and Expense feature allows businesses to conduct transactions affecting two subsidiaries. This feature accounts for the potential overlap of employee interactions and transactions across one or more of your subsidiaries in your OneWorld NetSuite account. Let’s take a quick look at this feature and how it works.
Intercompany Time and Expense Overview
How does OneWorld operate without this feature? Without the NetSuite Intercompany Time and Expense feature, employees, vendors, and customers are all connected to a single subsidiary. Any transactions entered for those entities cannot involve any entities from other subsidiaries.
But what if more than one subsidiary is involved in a single transaction? For example, suppose that employees from Subsidiary A need to do work for customers from Subsidiary B. With the Intercompany Time and Expense feature, you can enter intercompany transactions like this or even transfer time and expenses between subsidiaries.
Setting Up Intercompany Time and Expense
To set up Intercompany Time and Expense, first you’ll need to enable the feature. You can turn on this feature under the Advanced Features section of the Accounting tab in Enable Features.
Then, you’ll need to set a few preferences over in your Accounting Preferences (Setup > Accounting > Preferences > Accounting Preferences). On the General subtab, go to the OneWorld section and make sure you’ve chosen the Allow option for the Intercompany Time field and the Allow and Auto Adjust option for the Intercompany Expenses field. The Allow and Auto Adjust option turns on automated intercompany adjustments. Then, save the page.
Using Intercompany Time and Expense
To use the NetSuite Intercompany Time and Expense feature, there are a few things you should keep in mind.
The Intercompany Clearing Account
First, you need to know about the Intercompany Clearing account and how that works. The first time you enter a transaction that affects two of your subsidiaries, NetSuite will create the Intercompany Clearing account. This financial account balances out the debits and credits involved in an intercompany transaction.
The Intercompany Clearing account falls into the “Other Current Assets” account category. You can rename this account, but you can’t delete it or create another account to take its place.
Each of your subsidiaries will have an Intercompany Clearing account, and any intercompany adjustments will always be recorded on the Intercompany Clearing account for the originating subsidiary in that subsidiary’s currency. The originating subsidiary would be the employee’s subsidiary, while the related subsidiary would be the subsidiary of the customer or project.
Intercompany Adjustment Options
How would you create an intercompany adjustment journal entry? You can create intercompany adjustments if you either . . .
1) Are the administrator of your NetSuite account or
2) Have the Intercompany Adjustments permission as well as access to your company’s subsidiaries.
You also need to have set the Intercompany Expenses preference to Allow and Auto Adjust and the Intercompany Time preference to Allow.
To create an intercompany adjustment journal entry, navigate to Transactions > Financial > Create Intercompany Adjustments. You can also access this page from the related task on the Period Close Checklist.
On the Create Intercompany Adjustments for Expenses and Time page, select the appropriate posting period. Any adjustments that need to be made for that period will appear in the list. Hit the Submit button once you’ve had a chance to look over the adjustments. This will create the related journal entries for each adjustment.
Recommended Help Doc: Example Intercompany Adjustment Scenario
Intercompany Best Practices
Finally, you should be aware of some best practices if you’re going to use the Intercompany Time and Expense feature. The big idea of these best practices are that if you want something to work for intercompany transactions, it needs to be available to both subsidiaries involved.
So, for one thing, you should use expense categories and service items that both the customer and the employee subsidiary have access to. Also, if you plan to use classifications in journal entries you should make sure your classifications are global. Otherwise, make sure you’ve enabled the Allow Empty Classifications on Journals preference on the General subtab of Accounting Preferences.
Conclusion
Having intercompany transactions may be necessary for your company, but tracking the movement of those expenses doesn’t have to be a headache. With the NetSuite Intercompany Time and Expense feature, NetSuite does a lot of the heavy lifting for you, ensuring that your finances accurately display what’s happening in each of your subsidiaries.
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