Setup Considerations: Direct Intercompany Activities

Direct intercompany is a financial accounting structure that enables transactions between different entities within an organization.

Direct Intercompany functionality automatically generates supplier invoices from customer invoices. It also automatically generates intercompany receipts to settle customer invoices when you settle supplier invoices.

You can set up your tenant to record direct intercompany activities. Recording these activities enables an organization to generate activities directly with another entity:

Debts
Payables
Receivables

Direct Intercompany transactions are required when there’s a legal requirement for a source document to meet statutory requirements. Example: When you enter a transaction for a company in another country or where there are tax reporting requirements.

Direct intercompany enables you to record an accounting transaction that occurs between at least 2 subsidiary or multinational companies within your organization. You can use direct intercompany to purchase goods or services from another company within your organization. Here are a few activities where direct intercompany enables you to record those transactions:

Customer invoices.
Customer invoice adjustments.
Supplier invoices.
Supplier invoice adjustments.
Intercompany payment.

Questions	Considerations
Do you have subsidiary companies, or operate multinationally?	If you have subsidiary companies or multinational branches that perform transactions with each other, consider configuring intercompany profiles. Intercompany profiles enable you to record and process those intercompany transactions.
Do you need to provide source documents for statutory requirements?	Transactions between companies in different countries frequently require source documents for statutory reporting requirements. On-behalf-of transactions don't generate source documents. Before you configure intercompany transactions, consider whether you need to set up direct intercompany.
What kind of transactions do your subsidiary companies normally perform with each other?	The transactions that companies within an organization perform with each other determines whether you need to structure Workday for direct or on-behalf intercompany. Configure direct intercompany if you need to represent transactions where the companies conduct business like a supplier and a customer. You can configure a company as both a customer and a supplier to another company. Configure on-behalf intercompany when a company processes the payments and invoices in place of the company that provides the goods and services to customers. If both intercompany relationships apply to you, configure both.
How do your companies use your account sets?	You can only create an intercompany relationship between 2 companies when those companies use the same account set. Before you configure your intercompany profiles, ensure that the companies use the correct account sets.
How do you process and settle your intercompany transactions?	If you want to settle your intercompany transactions, you must configure these options on the Edit Company Intercompany Profile task: Default Payment Types Initiate Allowed Payment Types If you want to record intercompany receipts automatically, select the Record Intercompany Receipts check box. When you don't automatically record receipts, you must create manual receipts to use in your settlement runs using the Record Intercompany Receipts task.
How do you configure your security role assignments?	Workday uses the security configuration of the initiating company when determining who can view the intercompany transaction. Example: The company that creates the customer invoice determines the security requirements to access and process the intercompany transaction. Workday instead uses the security configuration of the customer on the original transaction to determine who can view the intercompany transaction when your company operates as the supplier. Consider setting up your company hierarchy role assignments to meet your security requirements if any users need to access both sides of the intercompany transaction.
Have you enabled company or cost center partitioning?	Ensure that there are no issues with the combinations as you enter transactions between the companies. Also, ensure that worktags flow from 1 company to another company. If there are some cost centers on the customer side, but not on the supplier side, you can enable a Review step on the supplier invoice to identify and correct the issue.
How many sales and purchase items will you use when mapping revenue and spend categories?	Consider these points: The amount of maintenance required when using sales and purchase items. How mapping items in various combinations and defaulting different worktags on supplier and customer invoices will affect performance.
Do you have multiple intercompany spend categories mapped to a single intercompany revenue category, or the other way around?	Perform one of these actions: Expand the number of intercompany revenue categories or spend categories to create a 1 to 1 relationship. Create multiple sales items that map to the single intercompany revenue category. Then, map each of the sales items to a purchase item in a 1 to 1 relationship. Each purchase item then maps to the appropriate spend category.

Functionality	Considerations
Account posting rules	Workday recommends that you configure separate rules for the Intercompany Payables and Intercompany Receivables account posting rules if you want to settle intercompany transactions. Separate posting rules enable Workday to create the payables and receivables necessary for you to run the settlement process. If you configure both direct and on-behalf-of intercompany, consider configuring a Direct Intercompany dimension on both the Intercompany Payables and Intercompany Receivables account posting rules. Adding the dimension enables you to split up the account posting rules you use for on-behalf-of and direct intercompany transactions. Depending on the transaction types you use, you also need to configure additional account posting rules. Common posting rules include: Cash Spend Revenue Transaction Tax If you don't want to post intercompany transactions to Cash , you can instead configure a pseudo bank account to record the costs. Consider configuring the pseudo bank account when you want to reroute settlement transactions from the pseudo account to a different ledger account.
Fiscal schedules	Workday recommends that companies configured for intercompany transactions use a shared fiscal schedule. The shared fiscal schedule can be an alternate or primary schedule. Sharing a fiscal schedule reduces the potential for creating erroneous transactions that you need to eliminate using a consolidation.
Intercompany affiliate worktags	Workday recommends that you enable intercompany affiliate worktags on customer and supplier invoices. Intercompany affiliate worktags help identify due-to and due-from companies on intercompany transactions. Identifying these worktags enables Workday to eliminate entries on consolidated financial statements. Workday also recommends that you configure your account posting rules to use the appropriate intercompany affiliate worktags as resulting worktags. Workday strongly recommends that you ensure your configuration doesn't result in a company creating intercompany transactions with itself.
Automate direct intercompany	Workday recommends that you automate parts of the invoice processing for direct intercompany transactions. You can configure the Customer Invoice Event business process to generate supplier invoices automatically from customer invoices upon business process approval. You can also enable automatic adding of these invoice items when you configure your customer and supplier relationships on the Maintain Companies as Customers or Suppliers task. Automatically adding invoice items reduces manual input and improves documentation. When you automate parts of the invoice processing, we recommend you add a Review Supplier Invoice step to your Supplier Invoice Event business process. The review step enables you to ensure the accuracy of automatic processing.
Custom validations	Workday recommends that you create custom validations to guide the creation and processing of direct intercompany transactions. Some validations we recommend include ones that: Requires that worktags are included on both customer and supplier invoices. Verifies that the user added intercompany affiliates on invoice lines for elimination rules. Confirms that intercompany affiliate populates according to the Company as Customer or Supplier of the transaction. Requires tax applicability, tax codes, and tax options on customer and supplier invoices. Adds restrictions on the intercompany transactions based on the intercompany profile settings.

Before you can create intercompany transactions, you must:

Create intercompany profiles for all your intercompany affiliates on the
Edit Company Intercompany Profiles
task.
Configure account posting rules for intercompany payables and intercompany receivables.
Create customers and suppliers based off the companies in your organization. These customers and suppliers should reflect the intercompany relationships within your organization for initiating and processing direct intercompany transactions.
Configure 1-1 mapping for:
Purchase items to sales items.
Revenue and spend categories.
You can only select mapped configurations (either revenue categories to spend categories or sales items to purchase items) in an intercompany transaction.

Before you configure direct intercompany, consider that you can only automatically process adjustments to direct intercompany invoices. You can't manually create a supplier invoice adjustment on a customer invoice adjustment at this time.

No impact. The existing intercompany configurations on the

Edit Tenant Setup - Financials

task apply specifically to on-behalf-of intercompany.

To create intercompany activities for another company, you must configure security roles for the activity on the other company. Example: If you're with Company A and you want to create an intercompany activity for Company B, you must have a security role that enables you to create also the activity for Company B.

Domains	Considerations
Set Up: Company Accounting on the Common Financial Management functional area.	Set up intercompany profiles. You need intercompany profiles to create intercompany transactions.
Set Up: Accounting Rules on the Common Financial Management functional area.	Set up account posting rules. You need separate account posting rules for your intercompany payables and receivables when you want to settle intercompany balances.

When you need to initiate direct intercompany transactions, configure the

Customer Invoice Event

and

Supplier Invoice Event

business processes. Enables you to create direct intercompany transactions on customer and supplier invoices. Add the

Initiate Supplier Invoice or Adjustment Creation

service on the

Customer Invoice Event

business process if you want to create automatically supplier invoices off customer invoices.

If your company needs to process and settle direct intercompany transactions, configure the

Settlement Run Event

business process.

Reports or Dashboards	Considerations
Intercompany Out of Balance Report	Identify and resolve intercompany out of balance issues.
Intercompany Payables and Receivables Reconciliation	Find and review out-of-balance amounts from posted journal lines on intercompany affiliate ledgers that remain at the end of the period. Enables you to identify and reconcile all intercompany items for each intercompany affiliate, including both matched and unmatched transactions.
Intercompany Work Area	Review intercompany activities, including in-progress journal lines, unrecorded receipts, and settlement runs. Enables you to find outstanding amounts due to or due from an intercompany affiliate.
Outstanding Intercompany Transactions	Find and review detailed information about outstanding intercompany transactions.

Web Services	Considerations
Get Account Posting Rule Sets	Retrieves detailed information about configured account posting rule sets.
Get Intercompany Profiles	Retrieves detailed information about configured intercompany profiles. Enables you to view detailed information across multiple intercompany profiles.
Put Account Posting Rule Set	Creates or configures account posting rule sets. Enables you to set up many account posting rule sets at once.
Put Intercompany Profile	Creates intercompany profiles. Enables you to set up many intercompany profiles at once.

You can use direct intercompany with customer and supplier invoices in Workday. Intercompany expands existing functionality by enabling you to generate activities on the accounts of other companies. The intercompany profile that you configure enables many intercompany activities across Workday.

Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.