Intercompany eliminations are one of those activities that look simple on paper and turn messy in real life. In a multi-entity structure, the challenge is rarely the elimination entry itself. The challenge is getting to a clean, agreed, complete intercompany position across entities before consolidation deadlines hit.
As a director supporting global corporates with distributed finance operations, I see the same pattern every year. Eliminations become painful when intercompany is treated as a month-end clean-up task instead of a controlled operating workflow. When you fix the workflow, eliminations stop being a fire drill and start becoming a repeatable close step.
This is where close and consolidation support, often delivered through Offshore Global Accounting Teams, can create real leverage. Not by “doing eliminations faster,” but by keeping the intercompany universe continuously reconciled so eliminations are mostly mechanical at the end.
Why intercompany eliminations break down during close
Intercompany issues build quietly and then explode during close week. The underlying causes are usually predictable:
- Timing mismatches
- One entity books a transaction this month; the counterparty books it next month
- Cut-off handling differs by entity, time zone, or local process
- Master data and mapping issues
- Incorrect intercompany partner codes
- Different GL accounts used for the same transaction type
- Inconsistent product, cost center, or entity mapping for reporting
- FX and settlement complexity
- Different FX rates applied by entities
- Settlement lags create aged balances that no one “owns”
- Unclear ownership
- Each entity assumes the other entity will fix it
- No one is accountable for dispute resolution
- Tool and process fragmentation
- Some entities work in ERP; others reconcile in spreadsheets
- Consolidation tool logic exists, but upstream data is not standardized
If these drivers are present, your consolidation team ends up doing detective work rather than elimination processing.
The CFO lens: what you really want from intercompany eliminations
Most CFOs do not care that eliminations were posted. They care about what eliminations represent:
- Confidence that group numbers are not overstated
- Faster close without late surprises
- Cleaner audit trail and fewer audit questions
- Fewer manual top-side adjustments
- Consistency across entities and periods
That is why the best intercompany programs focus on building a controlled upstream engine, not just a better elimination journal.
The operating model that makes eliminations easier
If you want to streamline eliminations, you need to separate intercompany work into three layers: prevent, detect, and resolve.
Prevent (design it so fewer breaks happen)
- Standardize intercompany accounting policies by transaction type (recharges, royalties, cost-plus, intercompany sales, loans)
- Enforce consistent GL mapping and intercompany partner tagging
- Align cut-off rules for high-volume streams (AP recharges, intercompany revenue, shared services allocations)
Detect (find breaks early, not at month-end)
- Run an intercompany mismatch report on a frequent cadence (weekly, sometimes even twice-weekly for high-volume groups)
- Track exceptions by root cause (timing, coding, pricing, FX, missing postings)
- Flag aged items with escalation rules
Resolve (clear disputes with ownership and SLAs)
- Assign named owners for each intercompany relationship or entity pair
- Use a dispute log with due dates and evidence links
- Separate “true disputes” from “process breaks” so you do not escalate everything
When you implement this, eliminations stop being a last-minute negotiation between entities.
The practical playbook: streamline eliminations in four workstreams
Here is the structure I recommend because it is realistic for most corporate environments.
Intercompany policy and template standardization
The goal is not a perfect policy manual. The goal is consistency that survives staff changes.
- Create standard templates for:
- Intercompany recharge calculations
- Markup methodology (if cost-plus applies)
- Intercompany AR/AP statements by entity pair
- Intercompany revenue and cost matching schedules
- Document the minimum required fields:
- Counterparty entity, intercompany partner code, transaction type, currency, rate source, period, reference ID
- Define a single tie-out approach:
- Subledger to GL (where applicable)
- GL to consolidation system
Intercompany matching and exception management
This is where most time is saved.
- Run matching by entity pair and by transaction type
- Tag exceptions into categories:
- Timing differences
- Coding or partner mismatches
- Pricing differences
- FX differences
- Missing entries
- Set aging rules:
- Items older than X days trigger escalation
- Items above materiality trigger immediate review
Settlement and aged balance governance
Aged intercompany is a CFO attention magnet because it often hides process failure.
- Maintain a weekly aged intercompany dashboard:
- By entity pair
- By transaction type
- By bucket (0–30, 31–60, 61–90, 90+)
- Define what “must settle” versus “can net” looks like
- Confirm FX treatment for revaluation and settlement consistently
Consolidation-ready elimination packs
Instead of rebuilding evidence every close, create an elimination pack structure that stays stable.
- Pack contents should include:
- Matched intercompany statements (both sides)
- Variance explanation for unresolved differences
- Elimination entry logic and mapping
- Support for FX approach
- Tie-out to consolidation trial balance
When this is consistent, audit requests drop because evidence is organized and repeatable.
Where Offshore Global Accounting Teams create leverage
Intercompany is a workflow problem and a cadence problem, which is why Offshore Global Accounting Teams can help when they are structured for ownership, not just support.
They can take consistent ownership of:
- Intercompany matching on a weekly cadence
- Exception categorization and first-level resolution
- Dispute log management and follow-ups with entity owners
- Template-based recharge schedule preparation and tie-outs
- Consolidation-ready elimination pack preparation
This approach is especially effective because intercompany work is repetitive but high-stakes. The same controls and templates, executed consistently, produce dramatically better consolidation outcomes.
A trust signal that matters in intercompany work
Intercompany is sensitive because it touches multiple teams, multiple entities, and sometimes internal politics. The only way it works is if execution is steady and communication is predictable.
One client described our delivery as feeling like a “dedicated extension” of their finance team, with steady communication and thorough execution. That consistency is exactly what intercompany governance needs.
How our Accounting Seat Model supports intercompany readiness
All our engagements are delivered as white label back-office accounting services, built to operate under your policies, your approvals, and your reporting cadence.
If the main challenge is execution capacity and consistency, our Accounting Seat Model is typically used to create dedicated ownership for recurring intercompany workflows, including matching, exception management, and elimination pack preparation.
Where Global Corporate Support fits for multi-entity consolidation
If the challenge is broader than intercompany and includes multi-entity close discipline, standard reporting packs, and group-level consistency, our Global Corporate Support is typically used to standardize execution across entities and keep consolidation inputs stable.
The question I would ask before your next close
If I asked your team today, “Which entity pairs create 80% of our intercompany issues and why,” would you get one confident answer or five different opinions?
If it is the latter, the fix is not more eliminations effort at month-end. The fix is a controlled intercompany operating rhythm: weekly matching, exception ownership, dispute tracking, and stable elimination packs. If you want to compare notes on what this could look like for your group structure, email me at [email protected].
FAQs
CFOs typically use it to mean outsourcing parts of the financial close and reporting cycle, including journals, reconciliations, close schedules, and reporting outputs, often described more simply as “close and reporting support.”
Intercompany eliminations remove transactions and balances between entities within the same group so consolidated financial statements do not double count revenue, expenses, assets, or liabilities.
Common causes include timing differences, incorrect intercompany partner coding, different GL mappings, pricing differences, FX differences, and missing entries.
Streamlining usually comes from running weekly matching, managing exceptions through a dispute log with owners and due dates, standardizing templates and policies, and preparing consolidation-ready elimination packs.
It is a report comparing intercompany AR/AP and other balances by entity pair. Many corporates review it weekly in normal periods and more frequently in peak close periods.
They can own recurring matching, exception categorization, follow-ups, elimination pack preparation, and tie-outs under your approval model, keeping intercompany continuously clean rather than month-end dependent.
Typically: matched entity statements, variance explanations, elimination logic and mapping, FX approach support, and tie-outs to the consolidation trial balance.
In this Article
editor
Maanoj Shah is the Co-founder & Director of Growth Strategy & Alliances at Finsmart Accounting, where he pioneered the “Accounting Seat” model—a revolutionary offshore embedded staffing solution purpose-built for Accounting and CPA firms. Widely recognized as an outsourcing and offshoring expert, Maanoj’s insights have been featured in leading accounting publications, and he regularly speaks at premier industry conferences including Scaling New Heights, Bridging the Gap, BKX, and Women Who Count.
A dynamic growth leader with over two decades of experience, Maanoj has incubated, scaled, and exited ventures across Fintech, HR, and Consulting sectors, holding various CXO roles throughout his career. His passion for scaling businesses is matched by his commitment to social impact. He is the Co-founder of Mission ICU, a national healthcare initiative that installs critical care units in underserved areas of India, and was recognized by the World Economic Forum for its last-mile impact.
Outside of work, Maanoj leads an active lifestyle as an avid tennis player and passionate golfer, blending strategy and agility on and off the court.
CONTENT DISCLAIMER
The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Finsmart Accounting does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.
FINSMART SERVICES
