Record to report / R2R – General Accounting – Inter company

Criticality of a journal entry process was discussed in our previous R2R post.

Our next segment is Inter Company Accounting. This process of general accounting is also a good back office candidate. A majority of the dealings for the outsource / back office unit in this process are internal to your client or principal. I requires a lot of coordination. This is not really classified as a voice based process, since the coordination with various units of the company are done over email / normal telephone calls. These calls cannot really be routinized, so you cannot have junior call-center personnel handling this.

What would be some key activities of this process?

  • Inter company reconciliations – We have already discussed this in detail, and this forms a major part of inter company accounting
  • Passing entries for inter company transactions
  • Inventory adjustments
  • Adjustment of losses during inter company transits
  • Allocation of sales / service revenue between inter company units
  • Allocation of charges / expenses / establishment costs revenue between inter company units
  • Foreign currency adjustments
  • Inter company resource allocations
  • Payroll transfers and their cost allocation in transition periods

This is not really an exhaustive list, but is a decent representation of the most practiced components of an inter company accounting process.

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