Intercompany Reconciliation
Every group with more than one legal entity has to make intercompany balances match before consolidation — Entity A's receivable from Entity B needs to equal Entity B's payable to Entity A — but in practice these balances drift apart because of timing differences (one entity books a transaction before the other), FX translation differences when entities report in different currencies, and genuine posting errors that go unnoticed until close. Finance teams spend days at every close cycle manually comparing intercompany schedules across entities, chasing down mismatches that could have been caught and fixed weeks earlier if anyone had been checking continuously instead of only at period-end.
STARTING PRICE
From €799
Complex tier · Multi-system orchestration, custom logic, and higher-volume or higher-risk processing.
Get a quote →Saves roughly 1-2 days per close cycle for a multi-entity finance team.
How the automation works
We build an ongoing intercompany matching process that compares each entity pair's mirrored balances continuously rather than only at close, decomposing mismatches into their likely cause — timing lag, FX translation variance, or a genuine posting discrepancy — so finance isn't starting the investigation from zero every quarter. Mismatches within a defined tolerance for timing and FX are tracked and expected to self-resolve on the next posting cycle; genuine discrepancies are routed to the entity accountants responsible with the specific transactions in question already identified, well before the elimination entries are due for consolidation.
Process flow
- 01
Continuous balance monitoring trigger
Intercompany balances across entity pairs are compared on an ongoing basis, not only during the close cycle, so drift is caught early.
- 02
Match mirrored transactions ai
Each entity's intercompany transactions are matched against its counterpart entity's mirrored entries by amount, date and reference.
- 03
Classify the mismatch cause ai
Differences are categorized as timing lag, FX translation variance, or genuine posting discrepancy, rather than presented as one undifferentiated variance.
- 04
Route genuine discrepancies output
Discrepancies that aren't explained by timing or FX are routed to the responsible entity accountants with the specific transactions identified.
- 05
Prepare elimination-ready schedule output
At close, a reconciled intercompany schedule is ready for elimination entries, with any remaining open items clearly documented rather than discovered during consolidation.
Inputs
- Intercompany transaction ledgers per entity
- FX rates and translation methodology
- Entity chart of accounts mapping
- Prior period intercompany reconciliation history
Outputs
- Matched intercompany balance schedule
- Classified discrepancy list by cause
- Elimination-ready reconciliation for consolidation
- Entity-level discrepancy trend report
Works with
Prefer a fully custom build instead of an off-the-shelf integration? We scope both options during your free consultation — most jobs like this one work fine on standard connectors, but higher-volume or non-standard systems sometimes need bespoke API work, reflected in the complex tier.
Where this goes wrong if you get it wrong
- Timing differences from one entity booking a transaction in a different period than its counterpart are the single largest source of apparent intercompany mismatches — these need to be recognised and tracked as expected-to-resolve rather than treated as errors requiring investigation every cycle.
- FX translation differences between entities reporting in different functional currencies require a consistent, documented rate source and translation methodology — using a spot rate for one entity and a period-average rate for another produces mismatches that have nothing to do with the underlying transactions.
- Intercompany markups and internal profit margins embedded in transfer pricing mean the two entities' balances aren't always meant to match at face value — the reconciliation needs to account for the agreed transfer pricing methodology, not assume a naive one-to-one balance match.
- A genuine posting error caught mid-quarter is far cheaper to fix than one discovered during close — continuous monitoring only delivers its value if discrepancies actually get routed and resolved as they're found, not simply logged and left for the close-cycle scramble anyway.
Frequently asked questions
How does this distinguish a real error from a normal timing difference?
Mismatches are classified by likely cause — timing lag between entities, FX translation variance, or genuine posting discrepancy — using transaction dates, currencies and historical patterns, rather than presenting every variance as an equally urgent problem.
Does this replace our consolidation software's elimination process?
No, it prepares a reconciled, elimination-ready intercompany schedule that feeds into your existing consolidation and elimination process, catching and resolving mismatches before they reach that step rather than during it.
How does it handle transfer pricing markups between entities?
The matching logic is configured against your actual transfer pricing methodology, so an expected markup between entities isn't misclassified as an unexplained discrepancy.
Can this work across entities using different ERPs?
Yes, as long as each entity's intercompany transaction data can be extracted, whether from a shared ERP or from separate systems used by different entities in the group.