Intercompany trade - introduction

When a project or an order, such as a sales order, is created, various entities within an organization perform activities to execute this order. For example, the sales office invoices the customer and the warehouse delivers the goods.

If the entities of an organization have their own profit and loss registration process, for each activity, internal cost and revenue transactions must be registered to balance the accounts. You can set up intercompany trade to allow the application to create internal cost and revenue transactions, and internal invoices.

Various options are available to set up transfer pricing rules or fixed amounts that determine the internal prices.

If you set up an intercompany trade relationship, the application creates intercompany trade orders for the entities involved to support their own profit and loss registration process. Intercompany trade orders trigger the creation of the internal cost and revenue transactions, and, if specified, the internal invoices.

On an intercompany trade order you can view the details of the intercompany trade activities, such as dates and times, the entities involved, amounts, and the transfer pricing rules on which the amounts are based. Depending on the transfer pricing rules, some pricing details are maintainable.

Intercompany trade orders can include an approval step. If approval is specified, deliveries are not allowed until the intercompany trade order is approved.

The approval process can be supported by a workflow application.

When the sales order lines of the sales order of the previous example are created, an intercompany trade order is also created. If approval is specified in the setup, W1 cannot deliver the goods to the customer until the intercompany trade order is approved.

LN distinguishes various types of internal trade processes and trade details, which are specified in intercompany trade scenarios and intercompany trade agreements. These scenarios and agreements are linked to intercompany trade relationships.

These settings determine the amounts of the cost and revenue transactions and, if specified, the internal invoice lines. Depending on the settings, you can adjust the transfer pricing rules or the amounts of the intercompany trade order.