Record to report / R2R – Reconciliations

Intercompany

You have read about five process components of an intercompany reconciliation process:

http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-6/

http://faoblog.com/processes-record-report-r2r-reconciliations-intercompany-7/

These were:

  • Statement collection
  • Balance confirmation
  • Listing of differences
  • Reconciliation
  • Timing differences segregation

As mentioned in the last post, next comes the items needing reconciliation. Now, this constitutes the most important part which we can call resolution.

  • Resolution – There will be a bunch of items which will need a resolution. By resolution we mean that both units will have to match, negotiate and pass correction entries, as may be needed. Now this also has some distinct components.
    • Evidence collection – You need to collect evidence for some items from both the intercompany units under reconciliation
    • Negotiation – In some cases negotiation may be needed. Like for example, different levels of transport charges booked by each unit, or different locational discounting used by each unit.
    • Approvals – Approvals might be needed by either unit to agree to a mid point and appropriate correction entries may be passed. In some cases, like intra-country transactions, approvals for adjustments based on the forex differences may be necessitated
    • Rectification entry – Post this, a rectification / adjustment entry has to be passed in the books of either or both entities to close the reconciliation difference.
    • Notification –  This would technically be the last step, where one or both units notify each other of the corrections and subsequent closure of the difference, clearly giving the date of closure, along with the details of adjustments / corrections.

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