Build an intercompany recharge workpaper that both entities can review

An intercompany recharge starts with a real cost and a stated reason for moving some or all of it between entities. Name the paying entity, receiving entity, expense family, period, currency, and policy owner. Then state the boundary: which costs qualify and which do not. A shared software invoice may qualify under one policy while executive travel does not. Do not let the spreadsheet decide that question through formulas. An offshore bookkeeper can gather invoices, tag costs, apply an approved method, prepare paired entries, and reconcile balances. Management decides the allocation policy, transfer-pricing implications, tax treatment, and exceptions. Put those decisions in the instruction before the monthly work begins.

Export the source ledger after the period cutoff and preserve it unchanged. Record the entity, account, vendor, transaction date, posting date, document number, description, amount, currency, and evidence link. Reconcile the export total to the source ledger before selecting eligible rows. Otherwise, the team may spend hours explaining an allocation that began with an incomplete population. Mark exclusions with a reason instead of deleting rows. If late invoices arrive, add them through a change log showing the date, amount, and approver. The general recordkeeping principles in the IRS guidance support retaining documents that substantiate the underlying costs.

Common drivers include headcount, seats, usage, floor area, or direct identification, but none is automatically correct for a particular company. The policy owner selects the driver and effective date. The workpaper should show the source of every driver value, the denominator, the receiving entity's share, and the formula. Keep raw inputs separate from calculations. If the driver changes midyear, preserve the earlier version and document which periods use each rule. Test that allocation percentages sum to the intended total and that excluded entities are intentional. A formula that produces a neat answer can still apply the wrong policy.

Each recharge line should carry a stable batch and line ID, originating cost reference, paying entity, receiving entity, allocation rate, recharge amount, due-to account, due-from account, expense or recovery account, currency, and posting period. Include the proposed journal references once posted. This design lets reviewers trace from either ledger to the same calculation. Avoid separate spreadsheets maintained by each entity; they drift quickly. If local account names differ, maintain an approved account crosswalk. Bookkeeping services can maintain the recurring file, but entity controllers should own changes to account mapping and materiality rules.

When entities use different currencies, show the transaction currency, functional-currency amounts, exchange-rate source, and date separately. Do not hide a translation difference inside the recharge amount. Likewise, flag sales tax, value-added tax, withholding, or cross-border questions for qualified review instead of assuming the invoice's original treatment carries through. The preparer's note should identify the fact pattern and missing decision. For example: "The vendor invoice was paid in USD by Entity A; Entity B records in CAD; approved rate date is absent." This makes the queue answerable without pushing accounting or tax judgment to a remote preparer.

Send a compact review packet to both entity owners: control total, eligible population, excluded items, driver version, proposed recharge, currency treatment, exceptions, and paired journal preview. Ask each reviewer to approve the same batch ID. One-sided approval leaves the other ledger vulnerable to a different period or amount. The bookkeeper records responses and does not interpret silence as consent. After approval, post through normal authorization paths and capture the journal IDs. The intercompany reconciliation handoff can then use those shared references when matching balances.

Compare both ledgers by counterparty, currency, batch, and period. Beginning balance plus recharges, settlements, corrections, and currency movements should equal the ending balance on each side after translation rules are considered. Classify breaks rather than reporting only a net difference. Useful causes include missing entry, wrong entity, different period, different amount, duplicate posting, settlement in transit, and exchange-rate variance. Give every open item an owner and review date. Never post a top-side plug merely to make consolidation balance. The controller chooses the correction after seeing the evidence.

The monthly sign-off should state the frozen population total, allocated total, excluded total, journal IDs, paired balance result, and unresolved exceptions. Management reporting support may surface material open items to leadership without burying them in a detailed workbook. Over several closes, inspect recurring late costs, manual overrides, stale drivers, and entity owners who approve different versions. Improve the intake or policy where repetition shows a process fault. Retain each period's inputs, calculations, approvals, and reconciliation together. A reviewer should be able to recreate the recharge without asking the preparer which file was final.

Start with a bounded population such as one recurring software vendor rather than every shared cost. Confirm that the source ledger, eligibility rule, driver file, account crosswalk, paired approval, and reconciliation all work for that population. Ask both entity reviewers to reproduce the calculation and identify the same open items. The pilot should expose unclear ownership before transaction volume makes it expensive. Record questions raised during review, then update the instruction only after the policy owner approves the answer. When the first two cycles reconcile cleanly, add another cost family with its own eligibility statement. Do not assume that a method approved for software also applies to insurance, rent, payroll, or executive expenses. Controlled expansion gives the business a usable recharge process while leaving policy distinctions visible.