Intercompany AR Checklist
Intercompany receivables between related entities must agree to the matching payable on the other side, or the group accounts will not consolidate cleanly. This checklist keeps both sides in step at month-end.
What this checklist covers
- Identify all intercompany receivable balances
- Agree each balance to the counterparty's payable
- Resolve timing and in-transit differences
- Confirm correct currency and elimination treatment
- Document agreement for consolidation and audit
7 min
Before you start
Intercompany reconciliation only works if both entities close to the same rules and talk to each other. Agree the timetable and the contacts before close.
- List all related entities and the intercompany accounts between them.
- Agree a shared cut-off so both sides report the same period.
- Confirm a contact in each entity to agree balances with.
- Note the currency and any rate convention where entities differ.
Step 1 — Pull and pair the balances
- Extract each intercompany receivable from your ledger at the cut-off.
- Obtain the matching intercompany payable from the counterparty entity.
- Pair each receivable with its payable and record the difference.
- Confirm both sides used the same cut-off date.
Step 2 — Resolve the differences
- In-transit invoices: raised by one side, not yet booked by the other — accrue or agree timing.
- In-transit cash: paid by one entity, not yet received by the other.
- Currency differences: agree the rate and account for revaluation consistently.
- Disputed charges: escalate to both entities' finance owners for a single answer.
Step 3 — Agree, eliminate and document
- Drive the unexplained difference to nil and have both sides confirm the agreed balance.
- Confirm the matched balances will eliminate on consolidation.
- Record the agreed position, the reconciling items and both sign-offs.
- Carry forward any agreed timing items to clear next period.
Tidy intercompany balances make consolidation and the wider close far smoother. Our free finance tools can help you keep the underlying invoices and terms consistent across entities, which is where many intercompany breaks begin.
Common mistakes
- Different cut-offs. If the two sides close on different dates, the balances cannot agree.
- No counterparty confirmation. Agreeing a balance with yourself is not a reconciliation.
- Ignoring FX. Different rates on each side create a difference that is not a real error.
- Leaving breaks for consolidation. Unagreed intercompany balances surface as ugly consolidation adjustments.
Key takeaways
- Each intercompany receivable must agree to the counterparty's payable
- A shared cut-off between entities is essential for balances to match
- Resolve in-transit invoices, in-transit cash and FX differences explicitly
- Get both sides to confirm the agreed balance before consolidation
Frequently asked questions
Why do intercompany balances need to match exactly?
Because on consolidation the receivable in one entity and the payable in the other are eliminated against each other. If they do not agree, the difference does not net to nil and shows up as a consolidation adjustment, which obscures the group's true position and complicates audit.
What causes most intercompany differences?
Timing — an invoice or payment recorded by one entity before the other catches up — and currency, where each side applies a different rate. Genuine errors and disputed charges account for the rest. A shared cut-off and an agreed rate convention remove most of the noise.
Who should resolve a disputed intercompany charge?
The finance owners of both entities together, so a single agreed answer is reached rather than each side holding a different figure. Escalating to one decision point prevents the same charge being argued every month and keeps consolidation clean.
Work the checklist, then get paid
Use the free Invoice Generator, then let Merion recover anything that goes unpaid — commission-only.