Intercompany Organizations
Associations with Legal Entities,
Suppliers and Customers
Bernardine Rogers
Bidisha Silveira
Contents
Glossary............................................................................................................................................3
a) Intercompany Organization.........................................................................................................3
b) Legal Entity..................................................................................................................................3
c) Receivables Business Unit............................................................................................................3
d) Payables Business Unit................................................................................................................3
1. Overview...................................................................................................................................4
2. Intercompany Organizations.............................................................................................4
Example 1 – 1 Intercompany Org > 1 LE - 1 AR BU - 1 AP BU..........................................................5
Example 2 – Multiple Intercompany Orgs > 1 LE – Multiple AR BU – 1 AP BU...............................6
3. Customer and Supplier Associations.................................................................................6
a) Customer and Customer Sites.....................................................................................................7
b) Supplier and Supplier Sites........................................................................................................10
4. Intercompany Examples..................................................................................................12
Example 1 – Intercompany Organization as a provider................................................................12
Customer Supplier Assignments Setup Required...............................................................................12
Invoices Created................................................................................................................................13
Example 2 Intercompany Organization as a receiver....................................................................13
Customer Supplier Assignments Setup Required...............................................................................13
Invoices Created................................................................................................................................14
5. Intracompany..................................................................................................................14
Example 3 – Intracompany Invoices..............................................................................................14
Customer Supplier Assignments Setup Required...............................................................................15
Invoices Created................................................................................................................................15
Glossary
a) Intercompany Organization
Intercompany organizations can be considered legal entities or management entities and they can
transact with each other. An intercompany organization is associated with a legal entity and optionally a
receivables and payables business unit.
b) Legal Entity
Each intercompany organization must be associated with a legal entity. Multiple intercompany
organizations can be associated with the same legal entity.
c) Receivables Business Unit
The receivables business unit is used when an intercompany transaction requires a receivables invoice
to be generated. The invoice is raised in the provider organization’s receivables business unit. If you do
not need to create receivables invoices for your intercompany transactions you do not need to assign a
receivables business unit to your intercompany organization.
d) Payables Business Unit
The payables business unit is used to record the invoice for the receiver organization. The invoice is
recorded in the receiver organization’s payables business unit. If you do not need to record payables
invoices for your intercompany transactions you do not need to assign a payables business unit to your
intercompany organization.
1. Overview
Create intercompany organizations in the Intercompany module which can then be used for
intercompany transactions processing. Associate one intercompany organization with each legal entity
(LE) to create transactions between LE’s (intercompany transactions) or associate multiple intercompany
organizations to an LE to create transactions within an LE (intracompany transactions).
Associate intercompany organizations to a receivables business unit (BU) so receivables invoices can be
generated in that BU with that organization as the Provider. Associate intercompany organizations to a
payables BU so intercompany invoices can be recorded in that BU for that organization as the Receiver.
The Intercompany module leverages the Invoicing and Customer features in Receivables to generate
invoices for intercompany transactions. Assign a customer account to an LE so an invoice can be
generated in Receivables. The Supplier feature in Procurement and the Payables Invoicing feature are
leveraged to record the payables side of intercompany invoices. Assign a supplier to the LE so an
intercompany invoice can be recorded in the Payables module. Assignments are done on the Manage
Customer Supplier Assignments set up within the Intercompany module and only one customer account
and one supplier can be assigned per legal entity.
2. Intercompany Organizations
Navigator > Setup and Maintenance > Financials Implementation Project > Define and Maintain
Intercompany Processing Rules > Manage Intercompany Organizations
Create intercompany organizations and assign them to LE’s and BU’s to enable invoicing for
intercompany transactions. You can create multiple orgs and assign them to an LE and each org can be
associated with different receivables and payables BU’s. The receivables BU must have the Billing and
Revenue Manage business function enabled. The payables BU must have the Payables Invoicing business
function enabled.
Example 1 – 1 Intercompany Org > 1 LE - 1 AR BU - 1 AP BU
In this example each LE is assigned only one intercompany org.
If Vis Ops (Vis Ops LE) is a provider, intercompany invoices are generated only in Ops AR BU. If Vis Ops
(Vis ops LE) is a receiver, intercompany invoices are recorded only in Ops AP BU.
Similarly, if Vis Services (Vis Services LE) is a provider, intercompany invoices are generated only in
Services AR BU. If Vis Services is a receiver, intercompany invoices are recorded only in Services AP BU.
Receivables BU
Ops AR
IC Org Legal Entity
Vis Ops Vis Ops LE
Payables BU
Ops AP
Receivables BU
Services AR
IC Org Legal Entity
Vis Services Vis Services LE
Payables BU
Services AP
Example 2 – Multiple Intercompany Orgs > 1 LE – Multiple AR BU – 1 AP BU
In this example multiple intercompany orgs are assigned to Vis Services LE and this set up allows for
intracompany invoices to be raised for Vis Services LE, between intercompany orgs Vis Services and Vis
Services 2. Note that each intercompany org can have its own receivables and payables BU.
Receivables BU
Vis AR Prod
IC Org Legal Entity
Vis Services Vis Services LE
Payables BU
Services AP
Receivables BU
Vis AR Finance
IC Org Legal Entity
Vis Services 2 Vis Services LE
Payables BU
Services AP
3. Customer and Supplier Associations
Navigator > Setup and Maintenance > Financials Implementation Project > Define and Maintain
Intercompany Processing Rules > Invoicing > Manage Customer Supplier Assignments
If you require invoices for your intercompany transactions, you need to associate a supplier and
customer account to your legal entity (and by association, to your intercompany organization). Each LE
can only have one customer account and one supplier assigned to it.
The customer account type must be ‘Internal’. Each customer account can have multiple sites each
associated with a different receivables BU allowing invoicing for the customer in a variety of receivables
BU’s. The customer account site needs to be a bill-to site and the ‘Primary’ flag must be checked.
Each supplier can also have multiple sites, each associated to different payables BU. Intercompany looks
for the site marked as the primary pay site for recording the payables invoice. The setup done in the
intercompany module is reflected below.
Customer
Acct 123
Legal Entity
Vis Ops
Supplier 123
Customer
Acct 456
Legal Entity
Vis Services
Supplier 456
a) Customer and Customer Sites
You must first create customer accounts that will be associated with legal entities as part of the
intercompany setup.
Internal Customer - Ensure the receiver organization’s customer is set up as an ‘Internal’ customer.
Customer Account – This is what appears in the list of values when selecting a customer account to be
assigned to a legal entity in the Customer Supplier Assignments set up in step.
Customer Account Site - The receiver organization’s customer account site must exist in the provider
organization’s receivables business unit. To do this, create a site with ‘Account Address Set’ that
matches the provider’s receivables business unit ‘Customer Account Site’ set. Note that it is possible for
a customer account to have multiple customer account sites, each associated with a different
receivables BU based on the Account Address Set.
Ensure the site has a primary bill-to site
b) Supplier and Supplier Sites
Create suppliers that will be assigned to legal entities as part of the intercompany setup.
Supplier Site - Ensure the Primary Pay option for the site is checked.
When creating intercompany transactions, the provider organization’s supplier must exist in the
receiver’s payables (i.e. procurement) business unit.
4. Intercompany Examples
Vision Corporation has 2 legal entities, Vis Ops LE and Vis Services LE which provide goods and
services to each other. The company has a requirement to record intercompany activity
between these legal entities. In some circumstances, Vis Ops LE provides goods to Vis Services
LE and in other circumstances Vis Services LE provides services to Vis Ops LE. Therefore it is
necessary for each of these legal entities to be able to invoice the other legal entity as well as
record a payables invoice received from the other LE.
Example 1 – Intercompany Organization as a provider
Intercompany Legal Entity Receivables Payables Comments
Organization BU BU
Provider Vis Ops Vis Ops LE Ops AR Ops AP AR invoice will be created in
Ops AR business unit which
is the receivables business
unit of the Provider.
Customer will be the one
assigned to Vis Services LE
Receiver Vis Services Vis Services LE Services AR Services AP AP Invoice will be created in
Services AP business unit
which is the payables
business unit of the Receiver.
Supplier will be the one
assigned to Vis Ops LE
Customer Supplier Assignments Setup Required
Legal Entity Customer Customer Site Supplier Supplier Site
Account
Provider Vis Ops LE Supplier Supplier 123 must
123 have a site with
Primary Pay site
purpose enabled in
Services AP
business unit
Receiver Vis Services LE Customer Customer Acct 456
Acct 456 must have a Bill To
Legal Entity Customer Customer Site Supplier Supplier Site
Account
site in Ops AR
business unit.
Invoices Created
Legal Entity Invoice
Provider Vis Ops LE AR Invoice 101 raised for Customer Acct 456 in Ops AR business unit
Receiver Vis Services LE AP Invoice 101 recorded for Supplier 123 in Services AP business unit
Example 2 Intercompany Organization as a receiver
Intercompany Legal Entity Receivables Payables Comments
Organization BU BU
Receiver Vis Ops Vis Ops LE Ops AR Ops AP AP Invoice will be created in
Ops AP business unit which is
the payables business unit of
Receiver.
Supplier will be the one
assigned to Vis Services LE
Provider Vis Services Vis Services LE Services AR Services AP AR invoice will be created in
Services AR business unit
which is the receivables
business unit of Provider.
Customer will be the one
assigned to Vis Ops LE.
Customer Supplier Assignments Setup Required
Legal Entity Customer Customer Site Supplier Supplier Site
Account
Receiver Vis Ops LE Customer Customer Acct 123
Acct 123 must have a Bill To
site in Services AR
business unit.
Legal Entity Customer Customer Site Supplier Supplier Site
Account
Provider Vis Services LE Supplier Supplier 456 must
456 have a site with
Primary Pay site
purpose enabled in
Ops AP business
unit
Invoices Created
Legal Entity Invoice
Receiver Vis Ops LE AP Invoice 102 recorded for Supplier 456 in Ops AP business unit
Provider Vis Services LE AR Invoice 102 raised for Customer Acct 123 in Services AR business
unit
5. Intracompany
Create intracompany invoices by setting up multiple intercompany organizations assigned to the same
legal entity. The receivables BU assigned to your provider intercompany org is used as the BU in which
the receivables invoice is raised. The payables BU assigned to your receiver intercompany org is used to
record the payables side of the invoice. The AR invoice generated is for the customer assigned to your
LE. The AP invoice is recorded against the supplier assigned to your LE.
Example 3 – Intracompany Invoices
Vision Corporation has one legal entity, Vis Ops LE which provides goods and services for
multiple intercompany organizations within the corporate structure. In some circumstances, Vis
Ops intercompany organization provides goods to Vis Admin intercompany organization and in
other circumstances Vis Admin provides services to Vis Ops. Therefore it is necessary for each of
these legal entities to be able to invoice the other legal entity as well as record a payables
invoice received from the other intercompany organization.
Intercompany Legal Entity Receivables Payables Comments
Organization BU BU
Provider Vis Ops Vis Ops LE Ops AR Ops AP AR invoice will be created in
Ops AR business unit which is
the receivables business unit
of the Provider.
Customer will be the one
assigned to Vis Ops LE
Receiver Vis Admin Vis Ops LE Ops AR Admin AP AP Invoice will be created in
Admin AP business unit
which is the payables
business unit of the Receiver.
Supplier will be the one also
assigned to Vis Ops LE
Customer Supplier Assignments Setup Required
Legal Entity Customer Customer Site Supplier Supplier Site
Provider Vis Ops LE Supplier Supplier 123 must
123 have a site with
Primary Pay site
purpose enabled in
Admin AP business
unit
Receiver Vis Ops LE Customer Customer Acct 456
Acct 456 must have a Bill To
site in Ops AR
business unit.
Invoices Created
I/C Org Legal Entity Invoice
Provider Vis Ops Vis Ops LE AR Invoice 101 raised for Customer Acct 456 in
Ops AR business unit
Receiver Vis Admin Vis Ops LE AP Invoice 101 recorded for Supplier 123 in
Admin AP business unit
