NetSuite Intercompany Eliminations
NetSuite is great at handling the accounting books for multiple entities and issuing consolidated financials. The system has useful features related to intercompany transactions that allow you to mark them for elimination. NetSuite allows you to eliminate intercompany transactions directly in the system using an elimination subsidiary. Many intercompany transactions result from a parent company selling product to a subsidiary or paying expenses on behalf of the subsidiary.
Customers can be classified as an intercompany customer representing a related subsidiary. Vendors are handled in the same manner. General Ledger accounts are also classified as intercompany accounts by checking a box on the account record. These three records are the core of the intercompany setup inside of NetSuite. Intercompany transactions can then be entered to reflect intercompany Accounts Receivable and Accounts Payable balances on each entities’ books.
Intercompany transactions can consist of several different types of records in NetSuite. For product being bought and sold between related subsidiaries, a Sales Order, Item Fulfillment, and Invoice would be entered for the selling entity. For the purchasing entity, you would enter a Purchase Order, Item Receipt, and Vendor Bill. In the case of expenses being paid on behalf of a related subsidiary, there is a transaction called ‘Advanced Intercompany Journal Entry’ that allows one journal entry to impact multiple entities. This allows for the expense to hit the correct entity’s books while also impacting the proper intercompany accounts.
At month-end or year-end, when it is time to eliminate intercompany transactions for the period, the elimination subsidiary is used to enter journal entries to eliminate the various intercompany accounts (sales, cogs, accounts receivable, accounts payable, etc). If you mark the customers, vendors, and accounts for intercompany elimination, NetSuite can auto-eliminate the accounts during the accounting period close checklist.
The result is viewing accurate consolidated financials in a timely manner. NetSuite can save you time and resources by allowing the system to do the grunt work. Many companies with multiple entities consolidate their financials using excel files and manually processes. With NetSuite intercompany elimination features, it takes the manual process out of it.