Introduction

The NetSuite Intercompany Framework feature allows you to manage intercompany workflows. Primarily, this feature manages intercompany cross charges and intercompany netting. 

NetSuite Intercompany Framework Overview

So how does the Intercompany Framework feature work? Let’s take a look!

Intercompany Cross Charges and Intercompany Netting

When the NetSuite Intercompany Framework feature has been enabled, you will have access to both intercompany cross charges and intercompany netting.

What are intercompany cross charges? A cross charge is created when one subsidiary performs services for another subsidiary. Essentially, it’s a charge within a company. The charge for the service is created during the period close process for that accounting period.

And what is intercompany netting in NetSuite? Intercompany netting allows you to settle intercompany open balances, generate settlement statements, and reduce the number of open intercompany transactions you have. 

Let’s look at a simplified example of intercompany netting. Suppose that Subsidiary A owes Subsidiary B $3,000, and Subsidiary B owes Subsidiary A $1,000. Instead of both subsidiaries paying each other, with intercompany netting Subsidiary A would pay Subsidiary B $2,000, which is the net amount owed.

Intercompany Framework Role

Which role permissions are required for working with intercompany reconciliation? The best practice here would be to create a custom role that has all the necessary permissions. This custom role would need access to subsidiaries and classifications. It would also need full access to accounting periods and the period close process, among other things. For more information about the requirements for this custom role, review the Intercompany Framework Permissions help article.

Required Features for Intercompany Framework

Unlike some features that just need to be turned on, the Intercompany Framework feature in NetSuite needs several other features to be enabled before it will work properly. Here are the features that you will need to use, organized by where you can find them in NetSuite:

  • Accounting, A/R, A/P, Accounting Periods (Accounting subtab, Basic Features section)
  • Intercompany Framework and Automated Intercompany Management (Accounting subtab, Advanced Features section)
  • Intercompany Cross-Subsidiary Fulfillment (Items & Inventory subtab, Inventory section)

Ideally, you would also want to enable the following features: Multiple Currencies, Multiple Calendars, Multi Subsidiary Customer, Multi Book Accounting, Classes, Departments, Locations, and Currency Exchange Rate Types.

NetSuite Intercompany Cross Charges

Given that overview of the NetSuite Intercompany Framework feature, let’s break down both intercompany cross charges and intercompany netting. We’ll start with cross charges. 

Generate NetSuite Intercompany Cross Charges

First, we need to understand how NetSuite generates intercompany cross charges. To generate intercompany cross charges, navigate to Transactions > Financial > Manage Intercompany Cross Charges. This will take you to the Cross Charge Workbench. If there are any unprocessed services between subsidiaries, the Generate Transactions button will be available to generate charges.

NetSuite Intercompany Framework Cross Charge Workbench

You can also generate intercompany cross charges from the Generate Intercompany Cross Charges task on the Period Close Checklist. This will take you directly to the Cross Charge Workbench page. After generating any unprocessed charges, select the Back to Period Close button to return to the period close checklist.  

View NetSuite Intercompany Cross Charges

Once you process intercompany cross charges, how would you be able to view them? Intercompany cross charges will show up on the following financial reports:

  • Balance Sheet report
  • Income Statement report
  • Cash Flow Statement report
  • A/P and A/R Aging reports
  • Intercompany Elimination report 

NetSuite Intercompany Netting

Now that we understand some of the basics of intercompany cross charges, let’s take a look at intercompany netting. 

NetSuite Intercompany Netting Best Practices

There are some best practices you should follow when working with intercompany netting. For one thing, it works best when you use the Automated Intercompany Management feature to generate all your intercompany transactions. This is because the intercompany transactions will be appropriately linked between the two subsidiaries. 

On a related note, it’s important that there be corresponding receivables and payables entries for each of the subsidiaries for the intercompany transactions. Also, each corresponding transaction must be for the same amount in the General Ledger in order for netting to work. 

How to Initiate Intercompany Netting Transactions

To initiate an intercompany netting transaction, navigate to Transactions > Financial > IC Netting > Balance Overview. This page displays pairs of subsidiaries, the A/R and A/P transaction amounts they have, and the amounts that are available for netting. 

NetSuite Intercompany Framework Netting Balance Overview

When netting is available for a subsidiary pair, you’ll see a New link under the Netting column. Selecting this link will take you to the Netting Workbench page. On the Netting Workbench, you can review the nettable transactions and save the page to create a Netting Statement.

The Netting Statement can be deleted if necessary (as long as the accounting period is still open) or it can be approved. Once the Netting Statement has been approved NetSuite will automatically create four Netting Settlements: two settlements to close out A/P and A/R for one subsidiary and two settlements to close out A/P and A/R for the other subsidiary. 

Conclusion

The NetSuite Intercompany Framework feature helps to streamline intercompany reconciliations. 

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