Configuring Intercompany Agreements in Dynamics AX and D365
Posted on: June 19, 2018 | By: Jarrod Kraemer | Microsoft Dynamics AX/365
Authored by: Rosey McAdams
One of our favorite features of Dynamics AX and D365 for operations is the ability to run multiple different companies (legal entities) under one organization in the same instance of the application. This gives us to have the ability to run two completely different businesses across the world from each other and still share the same chart of accounts and standard processes. Another cool feature the Dynamics legal entity structure supports is the ability to buy and sell between two different legal entities under the same organization triggering the appropriate corresponding transaction in each legal entity while only actually processing the transaction in one – this is intercompany trade.
In this blog we will define intercompany trade and look at the basic setup needed for your organization to be able to buy and sell between two different legal entities as well as setup trade agreements between the two legal entities. (Please note that the setup shown will be displayed in D365fO, however all of the same setup applies to Dynamics AX 2012 as well.) Let’s get started by defining both intercompany trade and trade agreements:
Intercompany Trade:
· One legal entity is buying
· One legal entity is selling
· The buying legal entity is a customer of the selling legal entity
· The selling legal entity is a vendor of the buying legal entity
Trade Agreements:
· Purchase agreements are contractual obligations with a vendor to buy an agreed upon quantity or value of goods generally for a reduced price or discount. Delivery of the product does not need to be at the same time or on the same Purchase order. With Purchase agreements you can create purchase orders when needed (release orders), within the agreement validity period, until the contract is fulfilled.
· A sales agreement is a contract that commits the customer to buy a product in a certain quantity or amount over time in exchange for special prices and discounts. The prices and discounts of the sales agreement overrule any prices and discounts that are stated in any trade agreements that might exist.
Types of Trade Agreements:
· Product quantity commitment – You purchase a specific quantity of a product.
· Product value commitment – You purchase a specific currency amount of a product.
· Product category value commitment – You purchase a specific currency amount in a procurement category. The amount can be for a catalog item or a non-catalog item.
· Value commitment – You purchase a specific currency amount of any product or in any procurement category.
Now that we understand what intercompany trade and trade agreements are, let’s go through the setup on how to configure legal entities to support both intercompany trade and intercompany trade agreements. First, we need to identify the legal entities that will be buying and selling to each other and complete the following steps to configure one LE as the buyer (customer) and the other LE is the seller (vendor):
1) In your buying LE create a vendor that will represent the LE you will be buying from
2) In your selling LE create a customer that will represent the LE you will be selling to
3) Setup the intercompany relationship between the buying and selling legal entities.
o In your buying LE navigate to the Vendor you setup and click on Intercompany trade.
o Enter in the selling legal entity and customer you setup there under Sales Relation
4) From the same intercompany form on the vendor complete the additional setup:
o Setup intercompany policies (PO and SO) number sequence to use, etc.
o Setup purchase/sales order mapping your intercompany relationship ours for both
o Agreements classification MUST be setup before you can create intercompany agreements
o Codes much match in respective setup – purchase classification = sales classification
o Setup Sales Agreement Policies
5) Verify that the setup is identical on both sides – exact same setup syncs to the customer in the selling legal entity
6) Before we can create an intercompany order or setup an intercompany purchase/sales agreement we must make sure whatever items we are buying/selling between the two companies are released to both companies!
7) Setup purchase agreement in buying company and click on the generate sales agreement button to sync the agreement with the selling company
8) Identical sales agreement will be produced in the selling company and the button show sales agreement will now be available
9) Click on show sales agreement button to navigate to the sales agreement – note it will switch your legal entity
That’s it! You should now be all set to buy and sell between two of your legal entities and utilize your intercompany purchase/sales agreements freely! For additional information on setting up intercompany trade feel free to reach out to us at info@loganconsulting.com or (312) 345-8817.
All the best!
Logan Consulting
www.loganconsulting.com