How to Create Intercompany Free Text Invoices

Scenario: You have an invoice from USMF that needs to be sent to a customer, but the revenue should be recorded in USSI without posting to an offset vendor account in USSI.

If this was to happen within USMF, you would create a Free Text Invoice, post it, print it, and send it to the customer. However, since this revenue needs to be booked in USSI, and AR Free Text Invoice does not support posting from one legal entity to another (unlike Accounts Payable where you can create an intercompany vendor invoice through AP Invoice Journal entry by offsetting the other legal entity), you need an alternative approach.

D365 Finance suggests posting intercompany customer invoices through a Sales Order or a Project Invoice, but this might not be feasible if the Project module is not used or if you do not want to post to a subledger transaction on the offset legal entity.

Due to the system’s limitations, user will have to do the following steps for the above problem statement:

Create and post the Free Text Invoice in USMF

Dr Customer – USMF
Cr Revenue – USMF

Book a General Journal entry to reclass the revenue from USMF to USSI.

Dr Revenue – USMF
Cr Revenue – USSI

Which automatically creates the intercompany transactions of:

Dr Intercompany Receivable – USSI
Cr Intercompany Payable – USMF

As a workaround to eliminate the second step of manual journal entry to reclass the revenue, it is possible to post this intercompany customer invoice through a General Journal (General ledger > Journal entries > General journals).

Create a General journal by posting to the USMF customer account and offsetting the USSI Ledger account

Under the Invoice tab, enter an invoice number.

This step is necessary if you would like to see this invoice under the Invoice journal record in Accounts receivable > Inquiries and reports > Invoices > Invoice Journal, so that an invoice document can be generated and printed.