More often than less, larger organization have multiple subsidiaries which interact with each other. These subsidiaries are financially (whenever) separate which makes these transactions a little different from internal. Due to financial separation these subsidiaries have different company codes. These transactions are called Intercompany Processes.

Let’s say, organization Hufflepuff Inc. has two company codes – 1000 and 2000 covering businesses in California and Florida respectively. Customer Harry wants an acoustic guitar and places the order with store front in California – Store 1000.

Store 1000 in California doesn’t manufacture acoustic guitar so they commit a delivery at a later date. A Sales Order is created with Store 1000 and user is provided with confirmation (based on availability at Store 2000). Store 1000 then creates a PO for Store 2000 in Florida who manufactures and sells acoustic guitar. This is an intercompany transaction. For Store 2000, Store 1000 is the customer. Hence, Store 1000 gets the invoice which is the handed over to customer taking into account taxes and other factors. The delivery can be made to customer by either Store 2000 directly or Store 1000 can receive the delivery from Store 2000 and deliver it to customer.

Remember, any transaction between Store 1000 and Store 2000 is intercompany transaction. So, a standard process would include an intercompany PO, intercompany billing and intercompany delivery.

~S