NetSuite intercompany elimination removes transactions between your own subsidiaries so the consolidated statements only show activity with the outside world. On paper the two sides cancel out. In practice, many groups run the elimination at month end and still find a balance sitting in intercompany accounts, and someone spends the afternoon working out where it came from.
Key takeaways
- Elimination only works on transactions posted to accounts flagged for elimination, between subsidiaries that NetSuite recognizes as intercompany partners.
- Leftover balances usually come from one-sided entries, timing differences, mismatched amounts or exchange rates.
- Each side of an intercompany transaction is translated at the rates for its own subsidiary, so foreign currency groups should expect a translation difference and decide where it goes.
- Reconciling intercompany balances before running the elimination is far easier than investigating the leftovers afterwards.
- A short monthly checklist, owned by one person, prevents most of the problems.
Intercompany balances not clearing? Book a free NetSuite review
What is NetSuite intercompany elimination?
In NetSuite OneWorld, each subsidiary keeps its own books, and a parent subsidiary consolidates them. When one subsidiary sells to another, lends it money or recharges costs, both sides record the transaction. For consolidated reporting, those amounts have to be removed, otherwise group revenue, costs, receivables and payables are overstated.
NetSuite handles this by posting elimination entries to an elimination subsidiary under the parent. The original transactions stay in each subsidiary's books untouched, and the elimination entries only affect the consolidated view.
What NetSuite needs for elimination to work
Elimination depends on setup that is easy to get slightly wrong:
- Accounts marked for elimination. Intercompany receivable, payable, revenue and expense accounts need the elimination setting on the account record. Activity in any other account stays in the consolidated numbers.
- Customer and vendor records that represent subsidiaries. Each subsidiary that trades with another needs a customer or vendor record linked to it, so NetSuite knows the counterparty is internal.
- Paired transactions where possible. Intercompany sales orders and purchase orders, or intercompany journal entries, keep both sides linked. Standalone entries made separately in each subsidiary are much harder to match.
- Consistent periods. Both sides should post to the same accounting period.
Why the balance doesn't net to zero
When intercompany accounts still show a balance after elimination, these are the usual causes:
- One side was never entered. Subsidiary A invoiced Subsidiary B, but B hasn't entered the bill yet.
- The two sides posted to different periods. A bill entered in the following month leaves a balance in the current one.
- The amounts differ. Freight, tax or a partial invoice was recorded on one side only.
- One side used an account that isn't marked for elimination, so that half stays in the consolidated numbers.
- Exchange rates. If the subsidiaries use different currencies, each side is translated using its own subsidiary's rates. Revenue and expense accounts use average rates, balances use period-end rates, and the difference does not disappear by itself.
The first four are process problems and can be fixed at the source. The fifth is expected, and the group needs an agreed account and method for recording it.
Get help setting up a monthly intercompany reconciliation
A monthly routine that keeps it clean
- Set a cutoff date for intercompany transactions, a few days before month end.
- Run an intercompany balance report or saved search by subsidiary pair and compare both sides.
- Chase and fix differences in the subsidiary that caused them, rather than with a topside journal.
- Run the elimination as part of the period close checklist, after the reconciliation is signed off.
- Review the consolidated statements and explain any remaining translation difference.
Consolidated statements depend on this work being done first. Our article on NetSuite financial statements and the Financial Report Builder explains how consolidation affects the reports themselves. If you are moving a group of entities onto NetSuite, our Xero to NetSuite migration plan covers how to bring intercompany balances across at cutover. And if you need ongoing help, our article on hiring an offshore NetSuite consultant covers what experience to look for in multi-subsidiary accounts.
Our NetSuite consulting services include OneWorld setup, intercompany configuration and month-end support.
Frequently asked questions
Does NetSuite eliminate intercompany transactions automatically?
NetSuite can generate elimination entries as part of the period close, but only for transactions in accounts marked for elimination between subsidiaries it recognizes as related. Anything recorded outside that setup stays in the consolidated numbers.
What is an elimination subsidiary in NetSuite?
It is a subsidiary that holds the elimination entries for its parent. It keeps those entries separate from the real subsidiaries' books, so each entity's own reports are unaffected.
Why do I have a currency difference after intercompany elimination?
Each side of the transaction is translated using its own subsidiary's consolidated exchange rates. Income and expense accounts use average rates while balance sheet accounts use period-end rates, so the two sides rarely translate to exactly the same amount.
Should I fix intercompany differences with a manual journal?
Only as a last resort. A topside journal hides the cause, and the same difference tends to come back next month. Fixing the entry in the subsidiary that caused it keeps both sides of the books correct.
Talk to Oakridge Global
Our NetSuite team sets up and supports multi-subsidiary accounts, and our accountants can run the monthly intercompany reconciliation for you. Schedule a consultation with Oakridge Global to go through your current process.