Lesson 2 of 5
Intercompany sales
13 min
An intercompany sale happens when the company that sells to the customer is not the company that owns the stock. For this course, assume Contoso's group includes a sister company, Contoso Parts Distribution LLC, with company code 1810 and plant 1810 Toledo (fictional, USD). Contoso Motor Co. (company code 1710) sells to Great Lakes Fleet Services through sales area 1710 / 10 / 00, but the alternators ship from Toledo.
Two companies, two sets of books. The customer sees one supplier and one invoice. Behind the scenes, Toledo sells to Contoso Motor Co. at an internal transfer price, and Contoso Motor Co. sells to the customer at the market price. SAP handles both sales from a single sales order.
- Sales order (1710)Sales org 1710 enters the order with delivering plant 1810; an internal price condition shows the transfer price
- Outbound delivery (1810)Created for shipping point at plant 1810 Toledo
- Goods issue (1810)Stock and cost of goods sold leave the books of company code 1810
- Customer invoice (1710)Standard billing from sales org 1710 to the customer; revenue in 1710
- Intercompany invoice (1810 → 1710)Billing type IV from 1810 to the internal customer that represents sales org 1710; revenue in 1810
- Supplier invoice (1710)Company code 1710 records the payable to 1810, often posted automatically from the intercompany invoice
What makes a sale intercompany
SAP recognizes the sale as intercompany because the sales organization (1710) belongs to one company code and the delivering plant (1810) belongs to another. For this to work, configuration must allow it: the delivering plant is assigned as permitted for the sales area, the sales order type is allowed for intercompany billing, and an internal customer number is defined to represent sales organization 1710 as a customer of company code 1810. That internal customer is the payer on the intercompany invoice.
Two prices on one order
The sales order shows the customer price as usual. It also carries an internal price condition (in the standard system PI01, or PI02 depending on how the price is defined) that holds the transfer price from 1810 to 1710. On the customer invoice this condition is statistical: it does not change what the customer pays, but it lets company code 1710 see its expected cost and margin. On the intercompany invoice, the corresponding condition (in the standard system IV01 or IV02) turns that transfer price into 1810's revenue.
| Price element | Value per alternator | Where it matters |
|---|---|---|
| Customer price | $200 | Customer invoice from 1710: 1710 revenue |
| Transfer price (internal price condition) | $170 | Statistical on the 1710 order; revenue on the 1810 intercompany invoice; cost for 1710 |
| Standard cost at plant 1810 | $148 | Cost of goods sold in 1810 at goods issue |
| Margin in 1810 | $22 | Transfer price minus cost |
| Margin in 1710 | $30 | Customer price minus transfer price |
| Group margin | $52 | Customer price minus cost; what the group really earns |
Contoso's intercompany prices. Plant 1810 cost and transfer price are fictional.
How the intercompany invoice is created
The intercompany invoice (billing type IV in the standard system) is created with reference to the delivery, after goods issue, usually in the same billing run as the customer invoice or in a separate scheduled run. It posts in company code 1810: receivable from the internal customer, revenue at the transfer price. Its output can be sent electronically so that company code 1710 receives an incoming supplier invoice automatically; SAP's Best Practices process for domestic intercompany sales (scope item 1HO) sends it by IDoc and posts it in accounts payable of the ordering company. Where that link is not set up, someone in 1710 must post the supplier invoice manually.
What would you do?
Maria creates a sales order in sales org 1710 for 50 alternators from plant 1810. Goods issue posts and the customer invoice is created, but billing the intercompany invoice fails with "no billing documents were generated". What should Priya check first?
- Intercompany sales: the selling company code differs from the company code of the delivering plant.
- One sales order drives a customer invoice from the seller and an intercompany invoice (IV) from the supplier.
- An internal customer number represents the selling sales organization as a customer of the supplying company.
- The internal price condition (PI01/PI02) is statistical on the customer side and becomes revenue on the intercompany invoice.
- The intercompany invoice can post automatically as a supplier invoice in the selling company.
Check your understanding · not graded
Lesson check
1. What makes a sale intercompany in SAP?
2. Which billing type is the standard intercompany invoice?
3. On the customer invoice, what is the effect of the internal price condition?
4. With a $200 customer price, $170 transfer price and $148 cost, what is the margin in the selling company?