Understanding Intercompany Processes

Objectives

After completing this lesson, you will be able to:

  • Understand Intercompany Processes

Intercompany Posting Logic

Adding on to the example provided in the Process Flow for the Intercompany Process section, let’s consider a scenario where a customer project is created in company code 1010 (Germany) for a German customer. An internal employee from company code 1010 (Germany) and an intercompany resource from company code 1710 (United States), are staffed to the project. Please refer to Customer Project Management (J11) and Internal Project Management (1A8) for more details on project setup and planning.

In this example, the following rates have been maintained in the Manage Cost Rates - Professional Services app:

  • The cost rate for the German consultant delivering in Germany is EUR 60 per hour.
  • The cost rate for the American consultant delivering in the United States is USD 75 per hour.
  • The intercompany margin between US and Germany is USD 18,75 per hour.
  • This means the American consultant delivering in Germany charges USD 75 + USD 18,75 = USD 93,75 per hour.
Note

Note that in this example USD 75 = EUR 60, therefore both consultants have the same local cost rate. The intercompany margin of USD 18,75 converts as EUR 15, so the cost per hour of the American consultant in the German project is EUR 75 per hour. Mind the currency in the following steps.

Time must be recorded for both employees staffed on the project, the internal employee and intercompany resource. Please refer to Time Recording (J12) for more details on how to record time on projects. Let’s consider, for example, that both consultants record 1 hour each on the customer project. Cost and revenue can be analyzed using the Projects - Actuals app.

Firstly, let’s focus on the cost and revenue for company code 1010 (Germany), in this case the ordering company:

  • The revenue for the German consultant is EUR 100.
  • The project is debited with a cost of EUR 60 for the German consultant. The consultant’s cost center is credited with the same amount.
  • The revenue for the American consultant is EUR 120.
  • The cost is split into the cost rate for consulting, USD 75, and the intercompany margin, USD 18,75. The project is debited with a total cost of USD 93,75 (EUR 75) for the American consultant.

Now focusing on the cost and revenue for delivering company 1710 (United States):

  • The intercompany margin is USD 18,75.
  • The project is debited with a cost of USD 75 for the American consultant. The consultant’s cost center is credited with the same amount.

The postings for the American consultant described above are done against intercompany clearing accounts in both companies. These accounts balance out to zero.

The net result is a credit in the American company code for USD 93,75 (EUR 75) and a debit in the German project for EUR 75 (USD 93,75).

As for expenses incurred by intercompany resources, a supplier invoice for travel expenses can be created in the delivering company, in this case company code 1710 (United States). The document type ER (Manual Expense Travel) must be used in the intercompany scenario as it triggers the reposting of the expenses to the ordering company 1010 (Germany). At G/L account item level, the expenses should be assigned to the work package of the project created in the ordering company. Please refer to Service and Material Procurement (J13) for more details on how to post expenses for internal employees without PO relation.

How to Perform Intercompany Processes

Navigate through process simulations for the Intercompany Processes (16T) scope item:

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