Reconciliation

Intercompany balances must agree. 1710's receivable from 1810 should equal 1810's payable to 1710, and the same for revenue against cost, loans against borrowings, interest income against interest expense. Intercompany reconciliation compares the two sides, finds the items that agree, and leaves a short list of differences for people to resolve. Doing it monthly, before the books close, is far cheaper than discovering the gaps in consolidation.

Intercompany Matching and Reconciliation

SAP S/4HANA includes Intercompany Matching and Reconciliation (often abbreviated ICMR), available since the 1909 release. It reads journal entries directly from the Universal Journal, so there is no data extract. The work is done in a set of Fiori apps: Define Matching Methods, Manage Assignments (by matching method or by reconciliation case), Schedule Matching Runs, Reconciliation Balances and Reconciliation Status Overview. Older systems may still use the classic FI intercompany reconciliation transactions; the concepts below apply to both.

Matching rules

A matching method is an ordered list of rules. Each rule divides the data into a leading side (for example 1710's receivable lines with trading partner 1810) and a partner side (1810's payable lines with trading partner 1710), then compares them on an expression: same reference, same amount, same trading partner pair. Items that match get an assignment number and drop out; the rest go to the next rule. A typical sequence starts strict and gets looser.

Tolerances and status

A reconciliation case defines what is compared at the aggregate level and sets tolerances, as an amount or a percentage per amount type. When the difference between the pair is within tolerance, the pair can be considered reconciled; otherwise it remains open. The Reconciliation Status Overview shows each company and partner pair with its matching and reconciliation status, and Reconciliation Balances shows year-to-date and period amounts and differences. Remaining variances get a reason code, which can trigger an adjustment posting, optionally through an approval workflow.

Reconciliation works at two levels and you need both. Line-item matching pairs individual documents: this billing document in 1710 with that supplier invoice in 1810. It tells you exactly which documents are missing or wrong. Balance reconciliation compares totals per account group, company and partner, for the period and year to date. It tells you whether the pair agrees overall, even if a few items match imperfectly. A pair can have perfect balance agreement and still carry many unmatched lines, for example when one invoice on one side relates to several partial invoices on the other. Use the balances to decide whether the pair is reconciled for the close, and the line items to keep matching clean over time.