Intercompany Netting

The Intercompany Framework feature includes the intercompany netting functionality. Intercompany netting enables you to settle mutual intercompany open balances across subsidiaries set up as represented customers and vendors. Intercompany netting automatically generates settlements, which reduces inaccuracies made through manually generated settlements.

When you use intercompany netting throughout an accounting period, you reduce the number of open intercompany transactions and receive the following benefits:

Less manual effort spent in reconciling, revaluing, and eliminating open intercompany balances
Reduced exposure to foreign exchange rates
Decreased time spent on payment processing and bank reconciliation
Reduced international payment fees because of fewer payments
Simplified period close process

The Balance Overview report shows the open balances between subsidiaries in a specific transaction currency. You can use this report to view the open balances before or after netting.

Note:

You must have access to the subsidiaries for which you want to settle intercompany open balances.

The following graphic illustrates open balances between two subsidiaries. Subsidiary A owes Subsidiary B $1000 and Subsidiary B owes Subsidiary A $5000. Before intercompany netting, the open balances generate four transactions. A vendor bill and customer invoice for $1000, and a vendor bill and customer invoice for $5000.

The following graphic illustrates how intercompany netting eliminates open mutual balances, and reduces the number of open intercompany transactions. Notice in the transaction workflow, the $1000 that Subsidiary A owes Subsidiary B is deducted from the $5000 that Subsidiary B owes Subsidiary A. After deducting the mutual open balances, Subsidiary B owes Subsidiary A $4000, and there are only two open balance transactions.

The following graphic illustrates the basic intercompany netting workflow. You review the open balances on Balance Overview page. NetSuite identifies the balances that are available for netting. You choose from the available balances for netting, which opens the Netting Workbench page where you select the transactions for netting. Alternatively, you can let NetSuite select the transactions for you.

Related Topics: