Intercompany reconciliation
Make both sides agree before you consolidate.
Quick answer
Intercompany reconciliation is checking that balances and transactions between group companies agree on both sides, for example that the £200,000 one company says it's owed equals the £200,000 the other says it owes, before you consolidate. Differences usually come from timing, missing entries, currency or miscoding, and must be fixed or explained so eliminations net to zero.
How to reconcile, step by step
- List intercompany accounts in every company, by counterparty.
- Compare each pair of balances at the period end.
- Investigate differences: invoices posted in one company but not the other, payments in transit, different exchange rates, or entries in the wrong account.
- Post corrections in the right company, or record a documented reconciling item.
- Confirm intercompany income and expense also match.
Example reconciliation
| Harbour UK: due from Retail | Harbour Retail: due to UK | |
|---|---|---|
| Balance per ledger | £212,000 | £200,000 |
| Invoice for September recharge not yet posted by Retail | £12,000 | |
| Agreed balance | £212,000 | £212,000 |
Preventing differences
- Agree a monthly cut-off date for intercompany invoices.
- Use one rate source for foreign-currency intercompany balances.
- Keep a separate account per counterparty.
Once balances agree, they can be eliminated. Consolidation apps such as Joiin make mismatches visible because the eliminated accounts won't net to zero.
Frequently asked questions
Why don't my intercompany balances agree?
The usual causes are timing differences, entries posted in only one company, different exchange rates, or transactions coded to the wrong account.