Introduction
In the modern business landscape, companies often have multiple subsidiaries operating across different countries and industries. These entities frequently engage in intercompany transactions, such as trading goods, services, and products. Ensuring the accuracy and consistency of these transactions is crucial for financial reporting and compliance. This is where Intercompany Matching and Reconciliation (ICMR) with SAP S/4HANA comes into play.
What is Intercompany Reconciliation?
Intercompany reconciliation is the process of consolidating various ledgers that record the operations of a company’s subsidiaries. This ensures that transactions between companies within a group are consistent and accurate. For instance, an invoice recorded as an account receivable (AR) in one subsidiary should correspond to an account payable (AP) in another.
Key Industry Requirements for Intercompany Reconciliation
1. Integration of Subsidiary Systems: Companies need a unified system that allows for the integration of all subsidiary data in a common format.
2. External Reporting Requirements: Companies must have strict internal controls to ensure transparency and compliance in their reconciliation process.
3. Group Close Requirements: Elimination of intercompany profits and adherence to a common closing schedule are essential for accurate group financial reporting.
4. Local Close Requirements: Real-time synchronization of tasks at the entity level is crucial for local financial reporting.
5. Intercompany Reconciliation: Automated rules for document matching, discrepancy alerts, and workflow-based remediation are vital for efficient reconciliation.
6. Master Data Requirements: Maintaining quality master data for intercompany vendor/customer IDs ensures consistency across subsidiaries.
Challenges in Intercompany Reconciliation
- Communication Overhead: Identifying and resolving reconciliation issues often requires extensive communication between teams.
- Data Discrepancies: Inconsistencies between subsidiary data can lead to inaccuracies in financial statements.
- Time-Consuming Processes: Traditional reconciliation methods can be labor-intensive and slow, especially with large volumes of data.
ICMR with SAP S/4HANA
SAP S/4HANA’s ICMR solution addresses these challenges by offering:
1. Real-time Processing: Eliminates the need for cumbersome ETL processes, enabling transaction-level matching in real-time.
2. Flexible Matching Rules: Users can set up matching and reconciliation rules without relying on IT teams.
3. Next-Generation Communication Platform: Automated workflows, alerts, and escalation mechanisms streamline communication and issue resolution.
4. Flexible Reporting: Smart reconciliation capabilities, dashboards, and analytical apps provide insights for timely decision-making.
5. Streamlined Closing: The solution supports a streamlined financial closing process, ensuring timely and accurate financial reporting.
Activate Best Practices Content
Before starting make sure that you load and activate the best practices content for Intercompany Matching and Reconciliation in your S/4HANA system. The scope item 40Y is available since release 1909. Standard data sources, matching rules, and reconciliation cases will be created with the scope item. Please keep in mind that in release 1909 you still have to do same manual load of content as described in SAP note 2818187 – Sample Matching Methods and Reconciliation Cases for ICMR in SAP S/4HANA 1909 – SAP for Me.
The general FAQ note for ICMR is also useful to consult: 2815304 – FAQ About SAP S/4HANA Intercompany Matching and Reconciliation (On Premise) – SAP for Me
Intercompany Matching and Reconciliation Basics in S/4HANA
ICMR in SAP S/4HANA is designed to address the challenges of intercompany transactions. It integrates with various data points, ensuring real-time data availability. The architecture of ICMR ensures that data is available in real-time, integrating daily operational postings, group reporting journal postings, entity close, and group close activities.
Reconciliation status overview in ICMR in S/4HANA:
Data Collection
Data collection is a pivotal step in the ICMR process. The integrated business architecture allows multiple SAP ERP and non-SAP ERP systems to connect to ICMR in SAP S/4HANA, supporting various business scenarios in an end-to-end integrated data flow.
SAP delivers standard data sources as a starting point which can cover most use cases. The data sources provided by SAP are available for:
- Accounting journals (ACDOCA)
- Consolidation journals (ACDOCU)
It is also possible to provide data from Non-SAP data sources or data upload via files.
The main consideration when setting up the data source are the leading unit and partner unit settings. The standard data sources are setup for the company code – trading partner relationship. In most cases this is the right level of reconciliation. However it is also possible to support intracompany matching and reconciliation with ICMR on profit center / partner profit center or Segment / partner-segment level. This is handled in the data source leading unit and partner unit settings.
An example data source reading the ACDOCA table with the unit settings is below:
Document Matching
Document matching is a core functionality of ICMR. It involves comparing intercompany documents between trading partners to identify matches and discrepancies. The matching method in ICMR is flexible, allowing users to define rules and criteria for matching documents. A matching method is a collection of matching rules and is used to match items between two data sets. Each matching rule narrows down the data source into two data slices using filters. Later in a matching run, the system first reads data based on the filters set for data slices and then applies the matching rule expressions to the filtered data.
If the items from each slice agree with each other, they are grouped under a matching assignment number. The data not yet in agreement is subject to the next matching rule.
Example Matching rules in a matching method:
The matching process flow and the standard reason codes:
How the assignment of documents in the leading and partner unit looks like:
Solving Data Discrepancies
Handling data discrepancies is crucial for accurate reconciliation. ICMR provides features like variance adjustment postings, which allow users to adjust discrepancies between leading and partner companies. Users can define templates for these postings, specifying details like posting keys, target general ledger accounts, and offset general ledger accounts.
Here is an example of a posting rule for automatic variance adjustments and how to trigger process looks like:
The posting rule defined to be used for automatic posting:
example posting for variance adjustments:
Validate Reconciliation Results
After matching and handling discrepancies, the next step is to validate the reconciliation results. Users can analyze the reconciliation of balances between each leading company and trading partner company pair. The Reconciliation Status Overview SAP Fiori app allows users to monitor the reconciliation status at an aggregated level and the matching status at the line item level. Additionally, users can define tolerances to compare reconciliation results between companies, ensuring that any differences fall within acceptable limits.
Conclusion
In today’s complex business environment, ensuring accurate intercompany transactions is more critical than ever. With SAP S/4HANA’s ICMR solution, companies can streamline their reconciliation processes, reduce discrepancies, and ensure compliance, leading to more accurate financial reporting and better decision-making.
