Intercompany Expense Reporting and Management in Microsoft Dynamics AX 2012

Multinational Professional Services Firms always have employees working out of different office locations and it is a common practice in this industry to share resources(workers) between companies to execute project/non-project tasks. In such scenarios, it is pretty common that employees of one legal entity works on the Project/non-project tasks of other legal entities and might incur expenses which needs to charged to the project or ledger of the borrowing entity.

Until AX 2012 R2, there was not a good option in AX to handle the accounting of intercompany expenses scenarios in an efficient manner.

With the introduction of intercompany expense reporting feature in AX 2012 R2, it becomes a lot simplified for the users to manage the accounting of such scenarios. In today’s post we will take a look at this this new functionality in AX 2012 R2 and understand how this works.

The enabling and disabling the intercompany expense management feature is centrally controlled by a new parameter introduced in the Travel and Expenses Parameters form.

  • Go to Travel and Expenses > Setup > Travel and expense parameters form.
  • Mark the “Allow intercompany expenses” checkbox to enable this feature.

Travel & Expense Paramter AX 2012

Note that prior to submitting an intercompany expense report, you need to make sure that the necessary intercompany accounting relationship is setup between the loaning and borrowing entities under the General Ledger Module.

Refer to my post on intercompany timesheets earlier to understand the loaning and borrowing entities.

Let us  now go to the enterprise portal and create an intercompany expense report. In this demonstration we will assume that,

  • USMF is the company where the worker is employed. (Loaning Legal Entity)
  • USSI is the contracting company where the worker does the work. (Borrowing Legal Entity)
  • Now, Navigate to EP > Employee Services > New Expenses Report.
  • Mark the Intercompany expense report check box.

New Expense Report

  • Click New Expense line button
  • Select the Borrowing legal entity. In this case I will select USSI.
  • Select the Expense Category and click OK. This dropdown will show the categories which are validated for the worker.

Select Expense Category and Legal entity

  • Key in the other required values such as transaction date, amount, payment method etc and save the expense line and then submit and approve the expense report.
  • Note that if you are entering a project related expense line, then you can select the project, line property, activity etc.
  • So with this, the accounting team do not need to worry about creating manual journal entries for these intercompany expenses as employees are able to enter the expenses directly in the borrowing legal entity.
  • Now, let us go ahead and post the approved expense report and analyze the financial voucher.
  • Navigate to Travel & Expense Module > Common > All Expense reports, Select the expense report and approve it.
  • Click the Sub ledger journal button to see the general ledger update which will happen when we post this expense report.

Financial Voucher

In the screenshot above, note that the intercompany ledger update in USMF and USSI are based on the intercompany accounting setup done under the GL module in both the entities and the other accounts gets automatically picked up based on the payment method setup and the ledger account setup for the expense category.

Simple ! Microsoft Dynamics AX 2012..

Till next time..keep exploring…



One thought on “Intercompany Expense Reporting and Management in Microsoft Dynamics AX 2012

  1. Pingback: From the Dynamics AX blogs: Intercompany Expense Reporting; Easy web services consumption; Connecting new Windows apps to AX; Retail EFT Configuration - Finance News - Site Root - Microsoft Dynamics Community

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s