Intercompany Billing of services

Guidelines for your Intercompany Billing process with SAP

In these days of globalisation, blurring industry boundaries and global talent crunches, it has become imperative for organisations to rethink their operating models and create new revenue streams. To prepare for this reality, organisations need to reinvent their back-office operations.

Has your business already expanded internationally? Has your organisation opened subsidiaries or multiple-related entities abroad? Congratulations! Great job!

Maybe you manufacture products in a separate related legal entity that supplies finished goods to your legal entity that distributes. Maybe you have a central order fulfilment operation that sources products from multiple related legal entities based on availability, or product characteristics. Perhaps you also have a central organisation that provides administrative, technical or other services for all other related legal entities and then charges them for such services.

Now you have opened new operations in new markets and centralised various services, you can substantially reduce costs and standardise processes and procedures. On the other hand, you will encounter an increasing complexity of your supply chain and/ or administrative services, posing new Intercompany Accounting challenges. And that’s great, because this is a result of increased business growth and expansion to multiple operating locations.

As such, a 2016 Deloitte survey among more than 4.100 accounting and finance professionals exposes the following challenges when implementing Intercompany Accounting:

  • The provided intercompany services must be trackable and invoiced according to the actual costs incurred;
  • Legal conditions (e.g. regarding profit shifting) must be met;
  • Internal Service Level Agreements must be considered;
  • In international contexts, exchange rate issues come into play.

Although insufficient accounting of transactions between various legal entities within a corporate group can lead to inaccurate financial reporting, yet less than 10% of the respondents to this 2016 Deloitte survey say their organisations have holistic, efficient, and well-communicated Intercompany Accounting frameworks.

 

How to implement your Intercompany Charging process in SAP

If you are using SAP ERP (ECC 6.0, S/4HANA, …), you already have everything in place to automate your Intercompany Billing processes and procedures. SAP Resource-Related InterCompany Billing (SAP RRICB) is a standard SAP ERP function to generate invoices between units within a corporate group, complying with legal and internal invoice requirements. You use this function to generate invoices between units within a corporate group. You need to do this if the unit that receives an order does not deliver the service, but the product/ service is instead delivered by another unit that is within the same organisation but in a different company code.

In addition to the customer invoice, the system can generate an intercompany (IC) invoice for the supplier to bill the seller.

You can also generate IC invoices if there are multiple intermediaries within the same group that need to bill each other for their participation in processing a sales order.

Although the standard SAP Resource-Related InterCompany Billing function (SAP RRICB) is already very extensive and covers many different requirements, we enhanced this standard SAP ERP function with the following features:

  • Allocation across the entire organisation, including cost objects that are not available in the SAP standard (such as internal order settlements, cost centre assessments, manual cost allocation, etc.);
  • Validation rules between the issuing and the receiving affiliate, preventing double contracts to be created between these two legal entities and verifying which services can be executed by/for which legal entities.
  • Another function prevents multiple contracts being created between the same affiliates;
  • Reposting of currency differences;
  • EDI functionality to ensure postings in the receiving company are reflected automatically.

 

As such, we created a very complete state-of-the-art SAP Add-On for SAP RRICB, covering all possible requirements for automating your Intercompany Accounting process in SAP. Furthermore, it complies with both legal and your internal requirements and prevents unauthorised or incorrect SAP CO allocations thanks to the extended validation approach. Currency differences are also assigned automatically. This new, improved process makes monthly closing faster, more secure and efficient.

Please click the button to learn how to streamline and accelerate your financial close process even more with the SAP Financial Closing Cockpit.

Please contact us if you want to know how SAP Resource-Related InterCompany Billing, together with the PIKON SAP Add-On will help you structure and automate your business processes. In the meantime, why not scroll through some other relevant content in the yellow tile: