Two companies share a ledger. Every line has to balance.

What intercompany looks like during a TSA. More flows than either side expects.

Before the carve-out, Newco was an internal unit. Charges, allocations, and shared cost moved through the parent ledger without intercompany postings because the parent and the unit were the same entity. After close, every flow between Newco and the seller becomes intercompany. TSA service charges from seller to Newco. Reverse TSA charges from Newco to seller where Newco supplies services back. Inventory transfers, intellectual property royalties, shared employee costs, cash sweeps, true ups on cost allocations. Each is a posting in both ledgers and each has to match.

The volume is higher than a routine intercompany flow between two separate subsidiaries because the entities were operating as one company yesterday. Multiple service categories, multiple billing cycles, and multiple cost types collide in the same period. The risk is that mismatches accumulate silently and surface as a reconciliation crisis at year end audit. The buyer-side advisor builds the reconciliation discipline from day one so the breaks are caught and cleared the week they occur.

The work pairs with TSA month end close coordination.

The four flow categories Newco and seller share. Each needs a different posting routine.

The first category is service charges. The seller invoices Newco for services delivered under the TSA, broken out by service line per the service catalog. Each invoice produces a credit on the seller books and a debit on the Newco books. Both sides should post in the same period using the same reference. The second category is reverse TSA charges, where Newco supplies services back to seller. Same logic in reverse. Postings on both sides, same period, same reference.

The third category is true ups and credits. Cost allocation true ups when seller actuals differ from the estimate, service credits issued for SLA misses, refunds on disputed line items. Each true up produces a two sided posting that has to land in the same period or the reconciliation breaks. The fourth category is operational flows that have nothing to do with the TSA itself but still move between the entities. Inventory purchased on the seller account but consumed by Newco. Customer payments collected by the seller on behalf of Newco. Tax filings made jointly that require apportionment. Each of these needs its own posting rule, agreed in writing.

The work pairs with TSA cost allocation methodology.

Daily reconciliation as the prevention. Catch the break in 24 hours.

Intercompany breaks are easy to fix in 24 hours and hard to fix in 90 days. The reason is memory. The people who posted the line know what they meant in week one. Three months later, those people have moved on and the documentation is thin. The fix is daily reconciliation, even if reconciliation only reviews the new postings since yesterday. The Newco intercompany team and the seller intercompany team should both be running the same reconciliation against the same trial balance every business day.

Breaks fall into three patterns. Timing breaks where one side posted today and the other will post tomorrow. These clear automatically and need only a flag. Reference breaks where both sides posted but the cross referencing failed and the lines cannot be matched. These need a manual match using the underlying source document. Amount breaks where the two sides disagree on the dollar amount. These need investigation against the source. The first two are routine. The third is the one that signals a real disagreement that has to be resolved through the governance process.

The work pairs with TSA invoice validation process.

Tooling that makes daily reconciliation possible. Spreadsheets break at scale.

For low volume intercompany, a spreadsheet reconciliation works. For typical TSA volumes, a dedicated reconciliation tool is faster and more reliable. Several enterprise tools serve this market. Some sellers run a reconciliation module inside the ERP. Some Newcos stand up a separate tool that reads from both ledgers and produces an exception list each day. The buyer-side advisor recommends the lightest tool that meets the volume and the auditor's expectation.

The tool produces three outputs. A matched lines report showing everything that cleared automatically. An exception report showing breaks that require attention. A trend report showing how the break population has moved week over week. The trend report is the artifact the governance committee reviews. A break population that grows means the underlying postings are out of control and need attention. A break population that stays flat or shrinks means the routine is working.

The work pairs with TSA governance best practices.

Dispute resolution when the amounts disagree. Escalation has a path.

When the Newco and seller postings disagree on amount, the difference goes through a defined resolution path. The intercompany teams attempt to resolve at the operational level using source documents. If that fails within a fixed window, usually five business days, the item escalates to the finance controllers on both sides. If the controllers cannot agree within another fixed window, the item escalates to the governance committee for decision. The path is documented in the TSA. Without a documented path, disputes either resolve through informal pressure or accumulate as open items.

The buyer-side advisor runs the escalation log and prepares the controller and governance level briefs. Each dispute has a recommended resolution backed by source documents and a precedent argument. Sellers respond well to disputes that are presented as factual claims with evidence. Sellers push back hard on disputes that appear as bare assertions. The advisor brings the evidence to the table. The work pairs with TSA dispute resolution process.

Open items that survive past month nine become exit risk. The advisor manages the open population down through the year so the exit cutover finds a clean state.

Exit cutover and the final intercompany settlement. Zero out before the exit.

The TSA exit is the moment intercompany settles to zero. Every outstanding balance is either paid, set off, or written off according to the exit terms. The buyer-side advisor builds the cutover plan three months before exit. Open balance review, dispute closure, final true ups, settlement payment schedule, written confirmation from both sides that the intercompany position is closed. Without this plan, the entities walk away with open positions that surface in audit a year later.

The audit clean exit also requires that the records on both sides match the closing settlement statement. The auditor for Newco and the auditor for the seller will both review the closing balances. A clean closing statement reduces audit cost on both sides. A messy closing statement extends audit work and risks restatement. The work pairs with TSA exit finance separation and TSA audit coordination.

The intercompany discipline through the TSA is what makes the cutover clean. Daily reconciliation prevents the break population that derails the exit.

More on TSA financial operations.