NetSuite Intercompany Cross Charges Setup Guide

NetSuite can generate intercompany cross charges during an accounting period or from the Period Close Checklist when Intercompany Framework is enabled. Each generation creates approved, read-only transactions for selling and buying subsidiaries, producing open payable and receivable balances in the configured trading currency. Intercompany preferences must be set first.

What Do Intercompany Cross Charges Generate?

The Intercompany Framework supports cross charges between subsidiaries that provide business services to one another. Oracle identifies two examples of activity that can produce cross charges:

• One subsidiary creates a sales order and another subsidiary fulfills that order.
• A centralized purchasing transaction has different billing and target subsidiaries.

When NetSuite generates a cross charge, it creates a pair of intercompany transactions automatically. One transaction is for the selling subsidiary and the other is for the buying subsidiary. The pair is automatically approved and read-only.

The resulting transactions create open intercompany payable and receivable balances. Those balances appear in the trading currency specified on the Intercompany Preferences page. This makes the preference configuration a prerequisite rather than a later cleanup step: NetSuite states that intercompany preferences must be set before cross charges can be generated.

What Must Be Configured Before Generation?

The following requirements and setup points are stated for the Intercompany Framework and its preferences.

An administrator who enables Intercompany Framework or Automated Intercompany Management receives access to the Intercompany Preferences page. For users with the required permission, the navigation is:

Setup > Accounting > Preferences > Intercompany Preferences

With Intercompany Framework in use, the page includes an Accounting subtab. It is where default accounts for Intercompany Framework and Automated Intercompany Management are defined. The Intercompany Framework uses its default accounts to generate cross charges, while Automated Intercompany Management uses default accounts to record and post intercompany purchase and sale transactions across subsidiaries.

The Accounting subtab also supports these Intercompany Framework settings:

• Currency and default exchange rate for subsidiaries doing business with each other
• How cross charges are grouped
• Default cross charge classification preferences by subsidiary
• Per-line classification for netting settlements, when Allow Per-Line Classification for Netting Settlement is checked

The preference options differ if only Automated Intercompany Management is used. For example, the source notes that the Intercompany Framework-specific settings above are not available in that case.

How Can You Generate Cross Charges?

NetSuite provides two generation points, corresponding to activity during the period and the period-close process.

How do you generate them during the accounting period?

Use the following navigation:

Transactions > Financial > Manage Intercompany Cross Charges (Administrator)

This is the stated path for generating cross charges throughout the accounting period. Teams using custom centers should account for an access detail after feature enablement: newly enabled feature menu items are not automatically added to custom centers. The relevant menu items must be added manually.

How do you generate them at period end?

At period close, use the Generate Intercompany Cross Charges task on the Period Close Checklist. This is a separate generation route from the Manage Intercompany Cross Charges page and places the activity in the period-close workflow.

How Does Intercompany Netting Relate to Cross Charges?

Cross charges leave open intercompany payable and receivable balances. Mutual open balances can be settled with intercompany netting.

Intercompany netting is included with the Intercompany Framework. It settles mutual intercompany open balances across subsidiaries set up as represented customers and vendors, and NetSuite automatically generates settlements. The source identifies the following outcomes when netting is used throughout an accounting period:

• Less manual effort reconciling, revaluing, and eliminating open intercompany balances
• Reduced exposure to foreign exchange rates
• Less time spent on payment processing and bank reconciliation
• Reduced international payment fees because there are fewer payments
• A simplified period-close process

The Balance Overview report shows open balances between subsidiaries in a specific transaction currency. It can be used before or after netting. Access matters here: users must have access to the subsidiaries for which they want to settle open intercompany balances.

Oracle’s example illustrates why mutual balances can create multiple open transactions. If Subsidiary A owes Subsidiary B $1,000 and Subsidiary B owes Subsidiary A $5,000, the balances produce four transactions before intercompany netting: a vendor bill and customer invoice for $1,000, plus a vendor bill and customer invoice for $5,000.

What Should Teams Verify in the Workflow?

Use the following source-based checks before relying on either generation route:

1. Confirm that Intercompany Framework is enabled and that Automated Intercompany Management is available, because the former requires the latter.
2. Confirm that intercompany preferences are defined before attempting to generate cross charges.
3. Set up intercompany elimination accounts before defining default intercompany accounts.
4. Review the Accounting subtab settings that control default accounts, currency, default exchange rate, grouping, and subsidiary-level cross charge classifications.
5. If netting is used, confirm that the involved subsidiaries are set up as represented customers and vendors and that the user has access to those subsidiaries.
6. For custom centers, manually add newly enabled menu items rather than assuming they appear automatically.
7. Use Balance Overview to view open balances in a specific transaction currency before or after netting.

Separate reading: Brazil Localization Enhancements Cash Sales E-Documents NetSuite — Brazil Localization enhancements improve cash sales, E-Documents, and compliance in NetSuite 2023.2.

Who This Affects

• Administrators: Administrators enable the relevant feature and must manually add newly enabled menu items to custom centers when needed.
• Users with Setup Accounting permission: These users can define intercompany preferences at the Intercompany Preferences page.
• Users generating cross charges: They use either Manage Intercompany Cross Charges during the period or the Period Close Checklist task at period end.
• Users settling balances through netting: They need access to the subsidiaries whose open intercompany balances they want to settle.

Key Takeaways

• Intercompany Framework generates a read-only, automatically approved cross-charge pair: one transaction for the selling subsidiary and one for the buying subsidiary.
• The pair creates open intercompany payable and receivable balances in the trading currency specified in Intercompany Preferences.
• Configure intercompany preferences before generation, and set up elimination accounts before defining default intercompany accounts.
• Generate cross charges from Manage Intercompany Cross Charges during the accounting period or from the Generate Intercompany Cross Charges Period Close Checklist task at period end.
• Intercompany netting can settle mutual open balances for eligible subsidiaries, while Balance Overview displays open balances in a specific transaction currency.