SD / O2Cbeginner

SD Intercompany Sales Part 1: How Intercompany Sales Work

Key takeaway

Intercompany sales happen when one company code sells and another company code delivers from its plant. Learn the flow — sales order, delivery from the other company's plant, customer invoice, intercompany invoice — and why two sets of postings are needed.

What this complete series covers

Learn Intercompany Sales in a clear, practical sequence — from the basic idea to real project use, troubleshooting, and interview-ready understanding.

Who it is for: Best for SAP consultants, developers, and learners who want a practical understanding of Intercompany Sales.
Prerequisites: Basic SAP S/4HANA navigation and an understanding of the business process are helpful. Configuration or transaction steps require suitable access to a practice or project system.
Final outcome: By the end, you should be able to explain Intercompany Sales clearly, follow the main end-to-end flow, apply it in a project scenario, and troubleshoot the most common issues.

Part 1: SD Intercompany Sales Part 1: How Intercompany Sales Work
Understand why intercompany sales exists, the roles of the ordering and delivering company codes, and the end-to-end document flow from customer sales order through delivery, custo
Part 2: SD Intercompany Sales Part 2: Configuring Order Types, Plants and Internal Customer
Learn the core configuration building blocks for intercompany sales: sales document and billing type assignments, the intercompany pricing procedure with the internal price conditi
Part 3: SD Intercompany Sales Part 3: Intercompany Billing, Pricing and Account Determination
Explains how intercompany pricing conditions drive the internal invoice (IV) between the delivering and selling company codes, and how account determination posts the corresponding

System and release assumptions: Examples focus on SAP S/4HANA. Exact apps, transaction codes, configuration paths, and field names can vary by release and deployment model.

Explanation

📌 KEY POINTS
✅ Intercompany sales: sales org of company A sells; plant of company B delivers.
✅ Customer receives one invoice (from A); company B invoices company A internally (IV).
✅ Both companies post: A revenue + cost (payable to B); B COGS + intercompany revenue.
✅ It is triggered by the plant's company code differing from the sales org's company code.
⚠️ Forgetting the intercompany invoice leaves company B without revenue.

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▶ WHAT THIS SERIES COVERS
Part 1: How intercompany sales work
Part 2: Configuring intercompany sales — order types, plants, internal customer
Part 3: Intercompany billing and pricing — internal conditions and account determination

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▶ 1. BUSINESS CASE

Shared warehouses, central production, regional sales companies.

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▶ 2. THE FLOW

Order in A with plant of B.
Delivery and PGI in B's plant.
Customer invoice (F2) from A.
Intercompany invoice (IV) from B to A.

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▶ 3. POSTINGS

B: inventory → COGS at PGI; IC receivable and revenue at IV.
A: customer receivable and revenue; vendor payable and cost from IV.

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▶ 4. TRIGGER

Plant assigned to A's sales org/channel but belonging to company code B.

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▶ 5. VS STOCK TRANSFER

Intercompany sales ship directly to the customer.
Cross-company stock transfers move stock between companies first.

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▶ STEP BY STEP

Create an order in A with plant of B.
Deliver and PGI.
Bill customer (A) and intercompany (B).

✅ CHECKPOINT: both company codes show the expected documents.

Code example

ABAP Code

===== STEP 1: example =====Company A 1000 (sales org 1000) sells | Company B 2000 (plant 2000) deliversOrder VA01 sales org 1000, plant 2000 → delivery/PGI in plant 2000F2 (1000 → customer) | IV (2000 → internal customer of 1000) ===== STEP 2: postings =====2000 PGI: Dr COGS Cr inventory | 2000 IV: Dr IC receivable Cr IC revenue1000 F2 : Dr customer Cr revenue | 1000 vendor invoice: Dr cost Cr IC payable

Real project scenario

A consumer goods company centralized production in one legal entity while sales companies invoiced customers. Initially, intercompany invoices were created manually at month-end, often late and wrong. Automating IV billing after PGI and posting the payable via IDoc made both companies' books accurate daily.

Common mistakes

Forgetting IV billing.
Confusing intercompany sales with stock transfers.
Manual month-end intercompany invoices.
Missing plant assignment.
No reconciliation.

Best practices

Automate IV billing.
Explain postings to both finance teams.
Reconcile IC balances monthly.
Maintain plant assignments carefully.
Document transfer pricing.

Interview angle

Questions: "Explain intercompany sales", "Which documents are created?", "What triggers intercompany?"
Strong answer: sales org of A, plant of B; delivery in B, F2 from A, IV from B to A; postings in both; trigger by plant's company code; difference from stock transfer.

Practice this lesson

Quick check

1. What is the primary purpose of the intercompany sales process in SD Order-to-Cash?

2. What primarily triggers the system to recognize that a given sales order requires intercompany billing?

3. When an intercompany sales delivery is billed, which two billing documents are typically created?

Interview questions

1. Suppose you inherit an existing Intercompany Sales solution. How would you review it before making a change?

Answer it in your own words first, then compare.

2. A consumer goods company produces in one legal entity and sells through regional sales companies. Customers must receive one invoice from their local company. How do you set it up?