In a group with entities in India and the UAE, intercompany balances never agree at month end. How would you fix this?

What the interviewer wants to hear

• Identify causes: timing, cut-off, FX rates, missing or disputed invoices, tax differences
• Agree a common cut-off, rate policy and settlement calendar
• Use matching reports and a single intercompany ledger or portal
• Account for TDS, GST and VAT on cross-border charges correctly
• Escalate unresolved items with owners and deadlines

Model answer

I would first analyse a few months of differences to find the causes. Typical ones are timing, where one entity books an invoice or payment before the other; exchange rates, where the INR and AED books use different rates; missing or disputed invoices; and taxes, for example the Indian entity deducting TDS on a payment to the UAE entity, which then records less cash. Then I would set a group policy: an intercompany cut-off a few days before month end, one rate source for conversion, the invoicing currency fixed in each agreement, and a rule that the billing entity raises the invoice and the other side books it immediately. A monthly matching report by counterparty and transaction makes gaps visible, and any difference above a threshold must be resolved by named owners before consolidation. Tax treatment for cross-border charges should be agreed in advance too.

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