NetSuite is a software suite for enterprise resource planning (ERP). It aids firms in achieving economic development and success by ensuring that business processes are properly optimized. It also has outstanding capabilities that aid in the automation of business operations and processes in a cloud environment. NetSuite will help you scale up your business in the same way it has helped many of its existing clients in different industries. Learn to fix business problems and enhance the operational processes with this Netsuite Training course available online. Accrediting the certification on Netsuite also aids in enhancing the skills required to work in Netsuite careers. Let’s understand the automated Intercompany Management and then will explore how to manage intercompany sales and billing transactions of sales orders using the OneWorld account in Netsuite.
What is Automated Intercompany Management?
NetSuite OneWorld’s Management of Intercompany Automation functionality allows you to handle intercompany transactions and produce entries for the elimination journal automatically. The feature, which was formerly called Intercompany Auto Elimination, has been expanded to include intercompany purchases and sales, and also inventory transfers of intercompany.
NetSuite creates journal entries for elimination depending on the intercompany journal and transaction lines specified to be removed when this trait is enabled. NetSuite assesses your intercompany accounts’ activity as part of the closing a period process. The journal entries are then created to remove any artificial loss and profit figures. You should manually create and monitor all intercompany transactions, and also create and post the journal entries of elimination manually if this feature is not enabled.
The following are the summary of steps in the Management process of Intercompany Automation:
- As required, create purchase orders of an intercompany per subsidiary.
- The sales orders of the intercompany are to be generated from purchase orders of the intercompany.
- Handle the transfers of intercompany inventory.
- Enter advanced journal entries of intercompany for other transactions of intercompany.
- Intercompany transactions must be reconciled.
- Use the Checklist of the closing period for running Intercompany Elimination.
- View the report on Intercompany Elimination.
NetSuite Intercompany Sales and Billing Transactions
You can handle the intercompany transactions of sales and billing processes using the Management feature of Intercompany automation. Creating, managing, and eliminating the intercompany transactions among your company’s subsidiaries can be performed. This feature minimizes the associated manual work to track transactions of intercompany and calculate elimination amounts.
You can produce a sales order of an intercompany from an existing purchase order of an intercompany that pairs transactions and configures the Status of the Intercompany to Linked. A paired transaction link is provided in the Transaction field that is paired. The amounts of intercompany are eliminated during the process of period closing when the orders are billed or invoiced.
The transaction workflow of intercompany allows you to:
- Create purchase orders for intercompany purchases.
- Determine the necessity for subsidiary-specific sales orders of an intercompany.
- Sales orders of Intercompany can be generated from purchase orders of intercompany.
- When necessary, create the matching sales orders of intercompany manually.
- If necessary, refuse purchase orders of an intercompany for a subsidiary.
The Manage page of an Intercompany Sales Order allows you to do all of these tasks except create purchase orders.
OneWorld Account supports a significant feature in NetSuite that allows you to manage intercompany sales transactions between multiple subsidiaries and automatically create elimination journal entries. The user will no longer need to manually establish and monitor inter-company transactions or manually make and submit elimination journal entries as a result of this.
To enable this feature, Navigate to Setup -> Company -> Enable feature -> Accounting, and then the “Automated Intercompany Management” box should be checked.
Then NetSuite will add some fields to the transaction record automatically.
Intercompany accounts, intercompany customers, and intercompany vendors are the next steps to take.
The “ELIMINATE INTERCOMPANY TRANSACTIONS” box should be checked to delegate an account as an intercompany account, as shown below:
For creating intercompany customers or vendors, we should have Payable accounts of intercompany Accounts and Receivable Accounts of intercompany.
In the next step, we will show you creating an intercompany customer and vendor using an example.
US-EAST, a support subsidiary, would like to purchase some manufacturing from US-WEST.
The intercompany customer must be set up as follows:
Subsidiary = US – WEST
Represents Subsidiary = US – EAST
And for Vendor record:
Subsidiary = US – EAST
Represents Subsidiary = US – WEST
Now that we’ve completed all of the basic steps, we can construct an intercompany Purchase Order and then a related Sales Order. The workflow for intercompany transactions is identical to that for purchases and sales. Create a purchase order for the subsidiary US-EAST to acquire something from the subsidiary US-WEST.
As we had not generated the intercompany Sales Order yet, the subsidiary is automatically set to US-EAST, the Intercompany Status is pending, and the Transaction field of Paired Intercompany is empty. Next, let us navigate to the transaction -> sales -> Manage Intercompany Orders.
The unlinked purchase order will be presented as we select the vendor we entered in the preceding Purchase Order. Choose the Purchase Order from which the Sales Order will be generated and click the “Generate Sales Order” button. The Sales Order would be automatically generated.
The Paired Intercompany Transaction is the Purchase Order we just created, and the Sales Order’s Intercompany Status is Paired. When we return to the Purchase Order, we can see that the Purchase Order has been updated consequently.
Standard Purchases and Sales Workflow is also followed by Intercompany Transactions. Item Receipts/Item Fulfillment can be created for Purchase Orders/Sales Orders, and also Vendor/Invoices Bills.
Dropshipping is also supported by the Intercompany Transaction. Generally, if NetSuite’s Advanced Shipping and Receiving feature is turned on, the Receiving/Fulfill procedures can be isolated from the billing process, and those tasks can be handled by various departments.
If one subsidiary sells inventory to an external customer, but another subsidiary fulfills the order, the Intercompany Transaction for dropshipping is used.
For instance, if the company has a Sales Subsidiary and a Warehouse Subsidiary, the Sales Subsidiary creates Sales Orders from external customers, and then sends an Intercompany Purchase Order to the Warehouse Subsidiary, the Warehouse Subsidiary fulfills the Intercompany Sales Order and ships the item to the external customers.
The Sales Subsidiary then creates Vendor Bills for the Warehouse Subsidiary and also Invoices for external customers.
In this article, we have learned to understand automated intercompany management along with a summary of processing steps. We then explained the implementation procedures required for managing the intercompany sales order with Sales and Billing Transactions in NetSuite.