As we discussed in previous blog Multi-Company Customer and Vendor Payments Part 1, there are two main tools available in Microsoft Dynamics AX to handle vendor payments and customer receipts across multiple companies – using Intercompany Accounting and using Centralized Payments. We will discuss Centralized Payments in an additional blog, Multi-Company Customer and Vendor Payments – Part 3 Centralized Payments.
The previous blog detailed the scenario, AP Payment Journal and resulting journal entries from both methods of doing multi-company vendor payments. This blog will go through the Intercompany Accounting set up in Microsoft Dynamics AX. (The screenshots in this blog post are from the New Microsoft Dynamics AX but the functionality is the same in Dynamics AX 2012. There are a few differences in the setup which I will note below.) Although these blogs primarily discuss multi-company vendor payments, the same functionality and setup apply for performing multi-company customer receipts.
Using Intercompany Accounting to handle vendor payments for multiple legal entities or companies in Microsoft Dynamics AX requires very little setup but involves many more keystrokes during payment creation, so it is used when multi-company payments are fairly rare.
First a little terminology. As I said in the previous blog, Intercompany Accounting allows you to have a journal with lines for different legal entities. When a multi-company journal is posted, Dynamics AX generates and posts multiple journal entries (one for each legal entity included in the journal) and automatically creates the Due To/From entries to balance the journal entry within each legal entity. For this discussion, let’s call the company you are logged into when the journal is created the origination company. The other company(s) which are posted to by the journal will be destination company(s).
To set up Intercompany Accounting, go to General Ledger > Posting Setup > Intercompany Accounting. (Dynamics AX 2012 = General Ledger > Setup > Posting > Intercompany Accounting)
This setup basically tells Dynamics AX (a) to what account(s) in the origination company are the Due To/From credits and debits automatically posted and (b) what Journal Name will be used to create the journal entry on the destination company(s). (The Journal Name must be created as a Type = Daily Journal in the destination company.)
Each combination of origination and destination company must be set up, both in the origination company and in the destination company(s). The above example is set up in USMF legal entity and will allow vendor payments between USMF and DEMF, between USMF and USRT and between USMF and USSI.
Next, you must go to each of the destination companies and perform the same setup. Remember to create a Journal Name (with Type = Daily) in each company. If the other companies have a different chart of accounts, account structure or currency, Microsoft Dynamics AX will automatically use their configurations for their setup and functionality.
A couple of final tips –
- Because posting an Intercompany Accounting journal to perform multi-company vendor payments automatically creates journals in the destination company(s), the user will need rights to create and post journal entries in those companies.
- To facilitate reconciliation of all the Due To/From accounts, our clients mark all these accounts as Do Not Allow Manual Entry. This will lock these accounts so that users cannot inadvertently post manual entries to them. You then have confidence that all the Due To/From accounts across all your companies will balance as they will contain only automatic entries. With the proper security, this box can be easily unchecked at month-end as needed to clear out the balances.
Processing Multi-Company Vendor Payments Using Intercompany Accounting
Above is the setup. Here is a short video of the actual process to select vendors, settle transactions and pay vendors across multiple legal entities using out-of-the-box Microsoft Dynamics AX Intercompany Accounting functionality.
Access our Community Resource Library for Part III on Centralized Payments and Part IV regarding Collections of this blog series. If you have additional questions, feel free to contact us here or by calling (800) 729-9971.
About the AuthorMore Content by Diann Spencer