Intercompany Transactions in Business Central: Part One

One of the reasons people use multiple companies in Business Central is to separate out legal entities. For example, a company with subsidiaries in other countries. Using intercompany functionality, users can transact between those companies. This will be the first of two parts covering intercompany transactions in Business Central. This first instalment will cover the setup, whilst part two will be a demonstration of the functionality. Throughout both parts, I’ll run through the process with my own demo data.

What we are trying to achieve

The aim of setting intercompany up is to allow users to transact between two legal entities. For example, two within the same group. When a purchase order is set up in one of those companies, we want a corresponding sales order in the other company, saving the user from having to replicate the order from the sales side. When we do this, it’s important that regardless of how each company names an item, the names both refer to the same thing. This keeps stock levels accurate in both companies.

To begin with, I am going create two companies. The second is just going to be a copy of the first, to save time. It’s worth stressing that the companies don’t need to be copies of one another to work, or even be remotely similar. For the purpose of this and the next post, my two companies will be named ‘Stuart’s – UK’ and ‘Stuart’s – Netherlands’.

Company information

To get to Company Information, either use the search bar or click on the settings cog on the right-hand side corner. In the Communication tab, you will find the fields related to intercompany.

In both companies you are dealing with, you will need an IC Partner Code field value. This will be specific to this, and only this, company. Each associated company will have their own.

The IC Inbox Type field dictates how the data will pass. If the two companies are on the same system, typically you will use ‘Database’. If you are transacting between different systems, ‘File Location’ will be more appropriate.

The IC Inbox Details field is a description field and isn’t mandatory. Perhaps this might be a useful identifier if you have companies with similar partner codes or company names.

Auto. Send Transactions

The Auto. Send Transactions field, if enabled, allows you to skip a validation stage in transacting between companies. From an efficiency perspective, we typically recommend this is enabled. It’s also likely that the same individual that sends the intercompany transaction to the outbox, is the same one who clicks ‘Send to IC Partner’ later. However, this is more of a process-related issue and depends on how companies wish to use this functionality. Enabling this field isn’t mandatory and I will explain the pros and cons in more detail in the part two.

Fortunately, you can reach another setup page from here.

Make sure these fields are set up in both companies before moving onto the next stage.

Intercompany Setup

On the Intercompany Setup page, you have the options to input values for the Default IC Gen. Jnl. Template and Default IC Gen. Jnl. Batch fields, as well as the fields that were on the Company Information page. These aforementioned fields relate to intercompany journal postings, something we won’t delve into in this post. However, their purpose is to define which specific templates and batches are used by default when general journals come across using intercompany functionality.

Customer and vendor records

So far, we have set up our intercompany codes on our two companies. However, we haven’t done anything to indicate which way around transactions will take place. You may wish for both companies to both buy and sell to one another. To do this, simply set up customers and vendor records in both companies, corresponding to the other company you are transacting with.

In the General tab on either the Customer or Vendor Card, click into the IC Partner Code and select the relevant value. You are now associating a record from one company with another company. In my demonstration, I have created a customer record for the Netherlands entity, in my UK company. Notice there’s an IC Partner Code. Let’s demonstrate adding this.

Intercompany Partner

To relate our customer record with the Netherlands’ company, we need to go to the Intercompany Partners page. Here, create a new record. In Stuart’s – UK, I have my intercompany partner record set up like this:

Again, make sure this is set up appropriately in both companies! Also, note ‘Company 2’ has a company display name of ‘Stuart’s – Netherlands’.

Earlier, I mentioned it was possible to associate an entity with both customer and vendor records. To do that, simply input the record into both the Customer No. field in the Sales Transaction tab, as well as the Vendor No. field in the Purchase Transaction tab. For the purpose of this demonstration, I am making the flow one-dimensional; Stuart’s – Netherlands will buy from Stuart’s – UK.

Auto. Accept Transactions

When a transaction goes to the other company, it will go into the Intercompany Inbox Transactions page. Until it’s accepted in the other company, there won’t be a corresponding order matching the one that was sent. However what the Auto. Accept Transactions field does, when enabled, is skip this added layer of security. So hypothetically, in my scenario, a worker in the Stuart’s – Netherlands company could come across a purchase order that they didn’t create or know about. So it increases efficiency, but it’s a question of whether one company should be able to input orders into another company without a member of that other company doing it themselves.

The field is located in the ‘General’ tab.

Deciding how the item record appears in the other company

The Outbound Sales Item No. Type field dictates which number is used for an item passing through, shown on the IC Partner Reference field on purchase and sales lines. So for example, if I sell item: ‘X’, but in the other company it’s called something else, we can control how this appears. These are the available options:

Ideally, the item numbers you are using are the same in both systems to avoid confusion. However, I’m aware that’s not always possible. In those scenarios, using something other than ‘Internal No.’ may be appropriate.

To use a Common Item No., click that option and then go to the Item Card in question. From there, in the ‘Item’ tab, input the value in the Common Item No. field. For the purpose of my demonstration, I will use the item ‘X’. The Common Item No. value I will demonstrate will be ‘X-ITEM’.

Alternatively, you may prefer to use an item reference number. To access this, on an Item Card, click ‘Related’, ‘Item’ and ‘Item References’. As you can see below, I’ve given it a Reference No. of ‘XX’.

In the next part, we will run through how this appears on the records passing through into the Netherlands company.

Closing remarks

As always, thanks for taking the time to read this! In the next part, we will run through a transaction between the two companies.

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