Intercompany reconciliation is the month-end check that balances between entities in the same group agree. For each pair, the amount one entity records as owed to the other, in a due-to account, should equal what the other records as owed to it, in a due-from account. You list each pair, compare the balances, and explain every difference. Most differences come from timing, entries recorded on only one side, or different amounts on each side. Once the pairs agree, they can be settled by transfer and eliminated when the group's books are combined.
What is an intercompany reconciliation?
It is a bank reconciliation between your own entities. Instead of books against a bank statement, you compare two sets of books against each other. Denver's "Due to Phoenix" should equal Phoenix's "Due from Denver." If it doesn't, at least one of them is wrong or out of date.
Why does it matter?
- Combined reports depend on it. When you add the entities together, matching balances cancel out. Unmatched ones leave the group showing money it owes itself.
- Settlement depends on it. You can't settle by transfer until both sides agree on the amount.
- Each entity's own results depend on it. A missing entry usually means income or expense sits in the wrong entity.
How do you reconcile intercompany balances?
- Close each entity's books for the period so no more entries land after you start.
- List every pair of entities that deal with each other, with the due-to balance on one side and the due-from on the other.
- Compare the two balances for each pair.
- Explain each difference, transaction by transaction if needed.
- Correct the side that is wrong, or note the timing item that will clear next period.
- Settle the agreed balance by transfer on your usual schedule.
What does a reconciliation look like with numbers?
A worked example at August 31, for the pair Denver LLC and Phoenix LLC:
| Line | Amount |
|---|---|
| Phoenix's books: Due from Denver LLC | $9,108.33 |
| Denver's books: Due to Phoenix LLC | $6,000.00 |
| Difference | $3,108.33 |
The difference breaks down into two items:
| Item | Amount | Fix |
|---|---|---|
| A $1,108.33 payment from a Phoenix customer landed in Denver's Stripe account. Phoenix recorded it as due from Denver. Denver booked it as its own income. | $1,108.33 | Denver moves it from income to Due to Phoenix LLC |
| Denver sent $2,000.00 to Phoenix on Aug 31. Denver recorded it that day. Phoenix will record it when it arrives on Sep 2. | $2,000.00 | Timing. Phoenix records it in September |
After Denver's correction, Denver shows $7,108.33. Phoenix shows $9,108.33 until the $2,000.00 arrives, then $7,108.33. The pair agrees.
What causes differences most often?
- One-sided entries. One entity records a charge or payment, and the other never does.
- Timing. A transfer is sent in one month and received in the next.
- Different amounts. One side records the gross amount and the other the net after a card fee.
- Wrong counterparty. An entry posted to Due to Portland that belonged to Due to Phoenix.
How do you keep it short each month?
- Use one due-to and one due-from account per counterparty, never a single mixed account.
- Record every intercompany entry in both sets of books on the same day, ideally by the same person.
- Put a shared reference, such as a payment ID or invoice number, on both entries.
- Settle balances on a fixed schedule so they never get large.
General information, not accounting advice.
Every figure on this page was checked against these sources on Oct 6, 2026. General information, not legal or tax advice.