NetSuite Automated Intercompany Management

The NetSuite Automated Intercompany Management feature allows you to create transactions between subsidiaries, allowing your subsidiaries to buy from and sell to one another. The Automated Intercompany Management feature also creates elimination journal entries to properly account for these transactions. Let’s take a look at how you would set this feature up in your account.

Overview

Setting up the NetSuite Automated Intercompany Management feature is fairly involved. Here are the specific steps you would need to take before your account is ready for basic intercompany transactions: 

1. Create elimination subsidiaries
2. Enable the Automated Intercompany Management feature
3. Create intercompany accounts
4. Create intercompany customers and vendors

In the rest of the blog, we’ll break each of these steps down.

Create Elimination Subsidiaries

First, if you don’t already have any elimination subsidiaries you’ll need to create them. Each level of your subsidiary hierarchy can have an elimination subsidiary. 

These elimination subsidiaries allow you to manage transactions involving two subsidiaries. Journal entries (and no other transactions) will post to your elimination subsidiaries. 

To create an elimination subsidiary, navigate to Setup > Company > Classifications > Subsidiaries > New. On this page, name your elimination subsidiary and make sure the Elimination checkbox is checked.

Enable the Feature

Once you have the appropriate hierarchy of subsidiaries, enable the feature under the Advanced Features section of the Accounting tab in Enable Features. You cannot disable this feature after enabling it.

System-Generated Tasks and Accounts

After enabling this feature, NetSuite automatically adds some things to your account. For example, your account will now have the Cumulative Translation Adjustment-Elimination (CTA-E) account. In addition, when you close periods you’ll notice the addition of the Eliminate Intercompany Transactions task in the task list on the Period Close Checklist. 

System-Generated Fields and Records

Some of the fields that are added to your account include the Intercompany Status and Paired Intercompany Transactions fields on Sales Orders, Purchase Orders, Return Authorizations, and Vendor Return Authorization records. NetSuite will also create two records: the Standard Intercompany Vendor Form record and the Standard Intercompany Customer Form record.

Create Intercompany Accounts

Next, you’ll need to create intercompany accounts. These are general ledger (G/L) accounts that record transactions like intercompany payments, loans, and funds transfers between subsidiaries. To create an intercompany account, navigate to Setup > Accounting > Manage G/L > Chart of Accounts >  New. While filling out information for the new account, select the Eliminate Intercompany Transaction box. 

The two types of intercompany accounts that you absolutely must set up for each subsidiary are an intercompany payable account and an intercompany receivable account. You’ll need these accounts when you create your intercompany customers and vendors next. 

Create Intercompany Entities

The next step is to create intercompany customers and vendors that can be used on intercompany transactions. Your intercompany customers will have the intercompany receivable account listed as their default account, and your intercompany vendors will have the intercompany payable account listed as their default account.

Create an Intercompany Customer

To create an intercompany customer, navigate to Lists > Relationships > Customers > New. You may need to select a specific form, such as the Standard Intercompany Customer form, in order to view all the necessary fields for creating an intercompany customer. On this form, name the customer, choose which subsidiary that customer belongs to in the Subsidiary field, and choose which subsidiary the customer represents in the Represents Subsidiary field. Selecting a subsidiary in the Represents Subsidiary field is what designates this customer as being an intercompany customer. 

Under the Subsidiaries subtab, you can select any subsidiaries that this customer will be in transactions with. The only subsidiary you cannot select here is the subsidiary you chose in the Represents Subsidiary field.

In the Default Receivables Account field under the Financial subtab, you can either choose a specific intercompany receivables account or leave this field on “Use System Preferences.” 

When “Use System Preferences” is selected, NetSuite uses the default account listed under the Accounting tab of the Intercompany Preferences page (Setup > Accounting > Preferences > Intercompany Preferences). 

Create an Intercompany Vendor

You would create an intercompany vendor in essentially the same way you create an intercompany customer. Navigate to Lists > Relationships > Venders > New. On this page, name the intercompany vendor, choose the subsidiary it belongs to, and choose the specific subsidiary it represents. Once you’ve listed any subsidiaries that this vendor can conduct transactions with under the Subsidiaries subtab and once you’ve checked that the right intercompany payables account has been selected, save the record.

Conclusion

When everything is set up for the NetSuite Automated Intercompany Management Feature, you’re ready to start creating intercompany transactions. At SuiteRep, we focus on all things NetSuite so you can focus on better business results. Contact us today to learn how we can partner with you.