Templates / Intercompany reconciliation
Intercompany Reconciliation Template
Matches transactions recorded between two related entities so intercompany balances net to zero.
What it is
An intercompany reconciliation template compares how a transaction between two related entities was recorded on each side. A management fee charged by a parent to a subsidiary should show up as a receivable on the parent's books and an equal payable on the subsidiary's books; a shared services recharge should net the same way. When both entities record the transaction correctly, the intercompany balances cancel out on consolidation. When they don't, usually because one side booked a different amount, a different period, or missed the entry entirely, the consolidated balance sheet carries a residual that has to be tracked down and cleared.
This gets harder as the number of entities grows, since the reconciliation is really a matrix of every entity pair that trades with each other, not a single list. A template that records both sides' amounts and the difference for each transaction, entity pair by entity pair, is the fastest way to see which relationship is out of balance and by how much, rather than staring at one consolidated variance and guessing.
Multi-entity businesses typically run this monthly, alongside the rest of the close, so intercompany differences get caught and corrected before they accumulate across periods.
Columns
| Column | What it holds |
|---|---|
| Entity A | The first entity in the intercompany relationship. |
| Entity B | The second entity in the intercompany relationship. |
| Transaction Description | What the intercompany transaction was for. |
| Entity A Amount | The amount recorded on Entity A's books, signed. |
| Entity B Amount | The amount recorded on Entity B's books, signed. |
| Difference | Entity A amount plus Entity B amount; zero when balanced. |
| Status | Matched, or a note on what's being investigated. |
How to use it
- 1.List every pair of entities that traded with each other during the period.
- 2.Pull the intercompany transactions each entity recorded against the other.
- 3.Enter both sides' amounts, keeping the signs opposite for a transaction that should net to zero.
- 4.Flag any row where the difference isn't zero as needing investigation, and name the likely cause.
- 5.Agree a correcting entry with both entities' bookkeepers before the consolidated books close.
- 6.Keep the completed sheet as support for the consolidation elimination entries.
Skip the spreadsheet
A spreadsheet works, but it doesn't match lines for you or remember what you did last month.