Understanding Intercompany Billing for Cross-Company Cost Accounting Postings (4AN)

After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Complete prerequisites for intercompany billing
  • Perform intercompany billing in the delivering company


Setting Up Business Partners

For intercompany billing purposes, a customer number must be assigned to each sales organization in the configuration step Sales Organizations. By doing so, you are identifying the sales organization as an internal customer that can be billed by other companies in the same corporate group.

To be able to assign a customer number to the sales organization, you first need to create a business partner for all company codes (ordering companies) involved in intercompany business, including the required business partner roles needed for Financial Accounting and Purchasing, as well as sales area data.

Setting up Intercompany Billing

Configure Intercompany Billing Communication

After business partners are created for each ordering company and assigned to the respective sales organizations, you can then use configuration step Configure Intercompany Billing Communication to enable intercompany billing between companies.

During an intercompany sales process, the supplying (or delivering) company generates an intercompany invoice made out to the ordering company. You can use Configure Intercompany Billing Communication to generate the SAP Electronic Data Interchange (EDI) configuration that the system uses to post this invoice to the ordering company code.

For example, delivering company 1710 (United States) invoices ordering company 1010 (Germany). From the perspective of the delivering company 1710 (United States), the intercompany invoice is a customer invoice. From the perspective of the ordering company 1010 (Germany), it is a supplier invoice. The system uses IDocs to automatically generate the corresponding payables in the ordering company's accounts.

Configure Intercompany Accounts Payable

To define the settings for posting accounts payable documents between company codes within a corporate group, you can use the following configuration steps:

  • Define Account Determination Groups: In this configuration step, you can create account determination groups and specify their descriptions.
  • Assign Sales Organizations: In this configuration step, you can assign sales organizations to the ordering company codes and maintain account determination groups.
  • Make Settings for Posting: In this configuration step, you can make settings for posting intercompany accounts payable documents.
  • Assign G/L Accounts: In this configuration step, you can assign G/L accounts for posting expenses.
  • Assign Tax Codes: In this configuration step, you can assign tax codes for ordering company codes.

Setting Up Internal Cost Rates

With the Manage Cost Rates - Professional Services app, you can define internal cost rates for activity allocations to projects. This app enables you to set cost rates based not just on cost centers and activity types but also on a variety of other criteria, such as service cost levels and individual employees.

For intercompany activity allocations, only cost rates marked as ICO rates are used. Rates with a receiving company, that is the company for which the service is provided (ordering company), take priority over rates with no receiving company. Intercompany cost rates can be maintained in the currency of the ordering company, which enables this company to be charged at a fixed rate independently of currency fluctuations.

Intercompany Billing

Intercompany billing happens between company codes within a corporate group. Once again, taking the example from previous sections, after a customer places an order for services from company code 1010 (Germany), this company code orders the services through a sales organization from a plant that belongs to company code 1710 (United States). In addition to the invoice for the customer, the system also creates an intercompany billing document for delivering company 1710 (United States) to charge ordering company 1010 (Germany).

The next sections will take you through the steps required to perform intercompany billing in the delivering company.

Intercompany Sales Order

For project-based services, intercompany sales orders must be created manually as a one-time activity for each delivering company involved in the intercompany process. The SAP Fiori app Create Sales Orders – Intercompany can be used to create intercompany sales orders, order type SO03 (Intercompany Order), for resource-related intercompany billing.

When delivering services for company code 1010 (Germany), the intercompany sales order for delivering company 1710 (United States) should be created to customer 10401010. That is, the sold-to-party should be set to 10401010 and the sales organization to 1710.


10401010 is the standard customer number for intercompany billing assigned to the sales organization of ordering company 1010. See the section Setting up Business Partners for more details.

To check whether the intercompany sales order for a given delivering company already exists, you can use the List Sales Orders – Intercompany app. Through this app, you can specify the following criteria:

  • Order type
  • Sold-to party
  • Document date
  • Material
  • Customer reference

Intercompany Billing Request

The resource-related intercompany billing request can be generated through the Generate Intercompany Billing Request app by scheduling a background job. The result of this job is a debit memo request, type DMR3 (Debit Memo RequestIC), for intercompany billing. This debit memo request includes time recordings and expenses related to intercompany services which will be invoiced to the ordering company later.

Intercompany Billing Document

Finally, the intercompany invoice, billing type CI02 (Intercompany Invoice), can be issued through the Create Billing Documents app by selecting the debit memo request generated through the scheduled job. In case there are several items in the billing due list, you can filter by SD Document Type DMR3 to obtain the list of intercompany debit memo requests which are ready to be billed.

For more details on the functionalities available in the SAP Fiori app Create Billing Documents, please refer to Sales Order Processing (J14).

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