Taming the Tangle — Managing Due To / Due From Accounts Across Entities
The Intercompany Challenge in Scaling Businesses
October 8, 2025
The Intercompany Challenge
As businesses grow and their legal entity structures become more complex, the need to manage intercompany transactions effectively becomes critical. This is especially true for real estate platforms, private equity structures, or any multi-entity operation that shares resources, funding, or overhead. At the center of this complexity are the "due to" and "due from" accounts—tools designed to track intercompany balances, but which often turn into a tangled web that slows down reporting and confuses stakeholders. A common issue we find initially with our clients is that there is no easy method to view whether the due to/from accounts reconcile.
The Root Cause: Exponential Complexity
The core problem isn't the use of these accounts, but how they're implemented and maintained. Without a clear strategy, these balances can spiral, leading to significant reconciliation issues, auditor scrutiny, and even misstatements in financials. One of the first steps to improving due to/due from management is recognizing the structural issue: when many entities fund or receive payments from many others, the number of intercompany relationships—and therefore accounts—grows exponentially. This creates a volume and complexity problem that few accounting teams are equipped to handle casually. The smarter approach is to centralize.
Centralize the Flow of Funds
Instead of allowing payments to move freely between any two entities, designate one or two entities to act as "cash hubs." All outgoing payments are funneled through these hubs, and any intercompany advances are recorded against just one counterparty. This dramatically reduces the number of due to/due from account pairings needed to track balances, cutting down on sprawl and confusion.
Design Your Chart of Accounts to Support Elimination
From an accounting standpoint, centralization allows for more standardized entries. Each due to/due from relationship can be assigned to a separate account—or managed using dimensions if your system supports it—so that when reported in a consolidating schedule, the accounts internally eliminate. For example, if Entity A owes Entity B $1,000, the receivable and payable should reside in accounts that are set up to net to zero at the group level. This requires some upfront design in your chart of accounts and reporting structures, but it pays off immensely in clean consolidations.
Prioritize Timely and Matched Entries
Timing is another challenge. Intercompany entries should be recorded promptly, ideally within the same accounting period. This helps reduce timing differences and eliminates the need for extensive "true-up" entries during month-end close. Ideally, both sides of the transaction—the due to and the due from—should be posted at the same time and by the same person or team. If that's not feasible, a formal process should exist for reconciling the balances between entities at least monthly.
Settle Regularly to Reduce Risk
To maintain clean records, accounting teams should establish and enforce a policy around settling intercompany balances. Whether it's monthly, quarterly, or on a rolling basis, intercompany accounts should not sit indefinitely. Long-outstanding balances complicate reporting and open the door to tax and audit risks. Having a cadence for settlement reinforces discipline and ensures balances reflect current, purposeful activity—not stale noise.
Leverage Tools for Scale and Accuracy
Technology can also assist. Intercompany modules in mid-market accounting platforms or custom scripts in Excel can automate offsetting entries, map receivables and payables, and highlight discrepancies. Even a simple intercompany tie-out worksheet maintained monthly can be powerful, especially when paired with a centralized log of all inter-entity transfers.
The Payoff: Clarity, Confidence, and Control
The result of all this structure? A balance sheet you can trust, an easy and visible method to verify your intercompany accounts balance, and a leadership team that knows their reporting is built on solid ground. Due to/due from accounts may never be glamorous. But managed well, they keep multi-entity businesses running cleanly—and that's a foundational strength worth building!
