Lesson 4 of 5
Differences
7 min
Every unmatched intercompany item has a cause, and the causes repeat. Learning to classify a difference quickly is the core skill of intercompany accounting, because the classification tells you who has to act and whether the fix is a posting, a process change or just patience.
| Type of difference | Example at Contoso | Usual fix |
|---|---|---|
| Timing | Alternators shipped May 30, received by 1810 on June 2 | Cut-off rule: goods-in-transit accrual by the buyer, or accept and document |
| Missing document | 1810 never posted the May insurance recharge | Partner posts the missing document in the period |
| Amount | 1810 keyed $17,000 instead of $34,000 | Correct the wrong side; automate the invoice |
| Currency | Partner with a different local currency translates at a different rate | Agree rate rules; compare in transaction currency |
| Classification | Trading partner missing or wrong account used | Fix master data; repost or reclassify |
| Dispute | 1810 disputes a price or quantity | Business decision; credit memo or agreement |
Common types of intercompany differences.
Timing differences
The seller recognizes the sale at goods issue or billing; the buyer recognizes the purchase at goods receipt or invoice. When the two fall in different periods, both books are right and the balances still differ. The group needs a rule: for example, the buyer accrues goods in transit at month end based on the seller's billing, or the difference is accepted and explained because it reverses the next month. What matters is that the rule exists, is applied consistently, and is visible in the reconciliation status.
Currency differences
When partners have different local currencies, the same transaction is translated at different rates on different days. If Contoso's planned Mexican entity sells to 1710 in USD, the Mexican books translate the invoice into MXN at their posting date rate, and month-end valuation then revalues it. Comparing the two sides in local currency will show differences even when nothing is wrong. Compare in transaction currency first; then treat the remaining local currency difference as a valuation topic with an agreed rate source and tolerance.
- Does the partner have a corresponding document at all?No → missing document or timing · Yes → next question
- Is the partner's document in a later period?Yes → timing; apply cut-off rule · No → next question
- Do amounts agree in transaction currency?No → amount or dispute · Yes → currency translation or tolerance
- Do both sides carry the right trading partner and account?No → classification; fix master data · Yes → investigate with both teams
Who owns the resolution
Each difference has one owner. As a rule, the side that is wrong or missing fixes it; for timing differences, the side named in the cut-off rule; for disputes, the business owners on both sides, with finance escalating if no agreement is reached by a set day. In SAP S/4HANA, the matching apps let accountants add notes, notify the partner, set items to done and record reason codes, which leaves a trail of who did what. Without a clear owner, differences age, and old differences are the ones auditors ask about.
- Day 1Run matchingAutomatic run after the period's billings and invoices
- Day 2Classify and assignEvery unmatched item gets a type and an owner
- Day 3Fix and postMissing and wrong documents posted; accruals for goods in transit
- Day 4Rerun and close statusRemaining differences explained with reason codes; pair status closed
- Next month, day 1Review aged itemsAnything older than one month escalated to Dan
Corrections follow the same discipline as any other finance posting. A missing document is posted by the side that missed it, in the period it belongs to if that period is still open, with the partner's document number as reference so matching can pair it. A wrong amount is corrected by reversing and reposting, or by a credit or debit memo, on the side that made the error. Adjustment postings triggered by reason codes should be reserved for small, agreed variances such as rounding and exchange differences; using them to force large differences to zero turns reconciliation into a plug machine. Keep a monthly report of adjustment postings by reason code and review it with Dan.
What would you do?
At Contoso's June close, a USD 6,000 difference between 1710 and 1810 has been open for three months. Nobody knows who should fix it. What is the best next step?
- Classify every difference: timing, missing document, amount, currency, classification or dispute.
- Timing differences need an agreed cut-off rule; currency differences are compared in transaction currency first.
- Each difference has one owner; the wrong or missing side usually fixes it.
- Recurring differences point to a process defect worth fixing at the source.
Check your understanding · not graded
Lesson check
1. Goods shipped by 1710 on May 30 arrive at 1810 on June 2. What kind of difference appears at May end?
2. In which currency should partners compare first?
3. Who usually owns resolving a missing document?