Many businesses have operations in several nations. There are several business interactions between two nations. Accounts Receivable and Account Payable Netting becomes a Herculean Task as a result of Inter-Company Transactions Purchase and Sale between Two Inter-Companies. Both companies may have a large number of outstanding payable and receivables transactions. Using external banks to accept or pay for the inter-company transaction is one method. In this blog post, we go over how to use SAP’s In-House Cash Center feature to process intercompany AR and AP.

Use Case

One of the biggest pharmaceutical companies in the UK, Jessy INC, produces vaccinations for several flu strains. Lenin is the head of finance at Japan-based Subsidiary 1 (Co Code 1000). Subsidiary 1 (Co Code 1000) manufactures the raw materials that go into making vaccinations. Sean is the director of finance for Subsidiary 2 (Co Code 5100), a German-based company. The COVID-19 vaccine is manufactured by Subsidiary 2 (Co Code 5100). Subsidiary 2 (Co Code 5100) produces a vaccine for COVID-19 after receiving the raw material from Subsidiary 1 (Co Code 1000).

The purchase and selling transactions between Subsidiary 1 (Co Code 1000) and Subsidiary 2 (Co Code 5100) result in intercompany receivables and payables. For the accounts departments of both companies, netting AR/AP transactions and paying to other subsidiaries is a significant effort. In the As-Is method, each company pays the other’s share of the AP from an outside bank, which has an effect on the cash available for external vendors and other uses. Sean and Lenin both desired a system that will prevent inter-company payments via outside banks so that the money were used wisely.


Business need

Fig: – 1

  • A billing document is received and posted by subsidiary 1 (1000).
  • Subsidiary 2 (5100) pays the subsidiary’s invoice.
  • A payment is created and sent to Head Office 0001 by Subsidiary 2 (5100).
  • For the benefit of Subsidiary 1000, Subsidiary 0001 shall process the receipt from Subsidiary 5100.
  • Similarly, at the corporate level, receipts and payments are tallied (Co Code 0001)

Utilizing SAP

Option 1: – The same SAP landscape has company codes (0001, 1000, and 5100) available.

Fig: – 2
Alternative Process Step

Fig: – 3

Invoice for a client with company code 1000

Fig: – 4
Invoice from vendor with business code 5100. Using the output type (RD04) AP, automation is feasible from the Sales & Distribution module. IDOC for vendor invoices may be activated.

Fig: – 5
Deposit in the company’s 5100 code (Background payment processing)

Fig: – 6
For an inter-company transaction, a payment order is created in the DBKE internal cash centre. within the IHC internal current accounts, posting for Dr and Cr

Fig: – 7
Internal bank statement for House cash deposited under Company code 5100

Fig: – 8
Internal bank statement for House cash submitted under Company code 1000

Fig: – 9
Open items for customers were closed in Company Code 1000.

Fig: – 10
Option 2: Using the In-House Cash Center in the Central Finance System, do AP/AR Netting.

Fig: – 11
Procedural Steps

  1. The EH8 system’s Co code 1100 is used to submit the Accounts Receivable invoice, and SLT is used to connect it to the Central Finance system.
  2. The SE1 system’s Co Code 1000 is used to post the accounts payable invoice, and SLT is used to connect it to the Central Finance system.
  3. Using the net amount from the inter-company reconciliation, manually submit an IHC payment order (see Fig. 7) for the net amount (Net of A/R and A/P): Open things: Total/Document data (please see Fig: 12 & Fig: 13)
  4. The Central Finance system will be initiated, posting the IHC internal bank statement as necessary.
  5. Enhancement of FINSTA IDOC and transmission to source systems (SE1 and EH8).
  6. (Enhancement) posting to AP/AR and to IHC bank account; interfaced to Central Finance system using SLT is the name of the SPROXY BAPI for FB01.

Open items: Inter-company reconciliation Report document in S4 HANA

Fig: – 12 (t-code FBIC025: Inter-company reconciliation open items: Document level) (t-code FBIC025: Inter-company reconciliation open items: Document level)

Open items: Inter-company reconciliation Total Summary – S4 HANA Report

Fig: – 13 (t-code FBIC026: Inter-company reconciliation open items: total data) (t-code FBIC026: Inter-company reconciliation open items: total data)

Amounts net of Accounts Receivable (AR) and Accounts Payable (AP) against the same trading partner will be reported in the S4 HANA inter-company reconciliation report for each combination of company codes (for example, 001300/INZ1 company codes pair) and for each company code for inter-company posting.

Option 1 illustrates how posting client receipt accounting will be done using bank statements from source systems (SE1 & EH8).


  • With the help of the billing output type RD04, vendor invoice posting can be automated. Consult the Sales & Distribution module to confirm.
  • Reconciliation Between Companies In S4 HANA, the Open Item Reconciliation (FBICR3) function can also be utilised for netting (1709 and above versions)


Using In House Cash Solution, the entire inter-company reconciliation procedure may be automated. Using manual payment instructions from the in-house cash centre, the solution can be implemented in a central finance system. Another choice is to use IHC centre netting in a standalone system with both company codes. This can be entirely automated.