Intercompany sales becomes complicated when we describe it as one transaction. It is really two connected commercial relationships: the selling company serves the external customer, while the delivering company supplies the goods to the selling company.
The organizational scenario
Assume company code A owns the sales organization and customer relationship. Company code B owns the delivering plant and inventory.
The external customer orders from company A. Company B ships the goods. The system must record the external sale and the internal charge between the two legal entities.
External sales flow
The selling company creates the sales order and customer billing document. External billing records the customer receivable and external revenue in company A.
A simplified entry is:
- Debit external customer receivable
- Credit external sales revenue
- Credit output tax, when applicable
The exact company code and accounts depend on sales and organizational assignments.
Delivery and goods issue
The delivering plant processes the outbound delivery. Post Goods Issue reduces inventory in company B and records the related cost.
A simplified entry is:
- Debit cost of goods sold in company B
- Credit inventory in company B
This is the physical fulfillment side of the process.
Intercompany billing
Company B must charge company A for the supplied goods. The intercompany billing document creates internal revenue and an intercompany receivable in B.
The corresponding payable must be recognized in company A, often through an inbound invoice process or automated EDI/IDoc integration.
Across the two entities, you therefore need to explain:
- external customer revenue and receivable;
- inventory reduction and COGS in the delivering company;
- intercompany revenue and receivable in the delivering company;
- intercompany cost and payable in the selling company;
- later settlement and consolidation elimination.
Why two billing documents are needed
The external invoice represents the legal relationship with the customer. The intercompany invoice represents the relationship between the selling and delivering companies.
One billing document cannot replace the other because the counterparties and legal entities are different.
Master data and organizational prerequisites
The flow depends on consistent setup:
- sales organization assigned to the selling company code;
- delivering plant assigned to the other company code;
- plant permitted for the sales area;
- internal customer and supplier Business Partners;
- material extended to the relevant sales and plant views;
- intercompany pricing condition;
- billing types and copy control;
- account determination and tax treatment;
- partner profiles and output settings when automation is used.
An error late in billing may originate from an earlier organizational or master-data gap.
INVOIC IDoc and automatic AP posting
Many designs use the intercompany billing output to create an INVOIC IDoc. The inbound process posts the supplier invoice automatically in the selling company.
When it fails, inspect the complete chain: output generation, IDoc status, partner profile, process code, company-code mapping, tax code, G/L determination and reference document.
Correct the root cause before reprocessing with BD87.
Reconciliation controls
Intercompany receivable in B should reconcile with intercompany payable in A after currency and timing differences are understood. Compare partner, reference, amount, currency and posting date.
Also reconcile the external margin in A and the internal margin in B according to transfer-pricing policy. Consolidation later eliminates internal revenue and cost, but operational books must still be correct.
The takeaway
Intercompany sales is one customer process supported by two legal entities and two billing relationships.
Follow the documents in order: sales order, delivery, PGI, external billing, intercompany billing and internal AP invoice. Then attach each accounting entry to the company code that owns it. The complexity becomes manageable when every document has a legal purpose.
Open the Intercompany Processing course diagram