Two companies in the same group should agree on what they owe each other. Most months, they do not.
Each pair of group companies agrees its intercompany balances every month: both sides report the balance owed, the differences are listed and explained, and corrections are posted before consolidation. Most differences come from timing, exchange rates, items booked by one side only, or mis-coded transactions, and a monthly cut-off and a shared rate table prevent most of them.
| Cause | Example | Prevention |
|---|---|---|
| Timing | Company A invoices on the 31st, Company B books it on the 2nd | Intercompany cut-off a few days before month end |
| Exchange rates | Each side translates at a different rate | One group rate table used by every company |
| One-sided entries | A recharge booked by the sender only | Recharges issued as invoices both sides must book |
| Mis-coding | Intercompany cost posted to a third-party supplier account | Separate intercompany accounts by counterparty |
| Disputes | One side does not accept a charge | Escalation route agreed in advance |
Collect every company's intercompany balances in one table with four columns: reporting company, counterparty, currency and amount in group currency, with receivables positive and payables negative. Build a grid with companies down the side and counterparties across the top, and fill each cell with:
=SUMIFS(Amount,Company,$A2,Counterparty,B$1)Then add each cell to its mirror image, for example Company A's balance with B plus Company B's balance with A. Every pair should total zero. Any pair that does not is a difference to explain before the consolidation runs.
Write a short group policy covering cut-off dates, which rates to use, who invoices whom, how disputes are settled and who has the final say. Most recurring differences are policy problems, not accounting problems.
Agreed intercompany balances are one of the reconciliations auditors expect to see in the year-end pack. See year-end audit preparation checklist.
The process is the same under IFRS, UK GAAP and US GAAP: intercompany balances and transactions are eliminated in full on consolidation. Tax rules on transfer pricing differ by country, so intercompany charges across borders should follow a documented pricing method.
12 questions on how strong your close controls are. Free to use online.
The Balance Sheet Reconciliation Library covers the balance sheet with nine working papers: a known error blocks sign-off, every supported balance needs an evidence reference and every aged item needs an owner and a next action. Excel, no macros, one-time price.
The side whose records are wrong, based on the evidence. If both are partly wrong, each corrects its own part. The group policy should name who decides when it is unclear.
Set a threshold in the group policy, but still record every difference. Small differences that recur every month usually point to a process fault worth fixing.
Set a settlement cycle in the group policy, for example monthly or quarterly. Regular settlement keeps balances small, reduces exchange differences and makes disputes surface quickly rather than at year end.
Yes, including accrued interest on both sides. Loans are often in different currencies, so the shared rate table matters even more.
Last updated 18 October 2026. General guidance for finance teams; check it against your own policies, systems and local rules.