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.

Internal prices

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

Intercompany trade orders

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.

Approval

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.

Setup

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.

An intercompany trade order is created if:

• An intercompany trade relationship is present for the entities involved in the fulfillment of an order.
• The intercompany trade relationship includes an intercompany trade scenario that corresponds with the business process involving the order.

The intercompany trade order includes information of:

• The originating order lines, such as delivery dates and item quantities
• The settings of the applicable trade agreement and trade scenario
• Other master data, such as business partner information and tax data

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.