Your client has four LLCs. You have four QuickBooks files, four bank feeds, and one afternoon in February to make the transfers between them agree. Pine shows $31,000 going out to Maple across the year; Maple shows $28,500 coming in from Pine. The difference is a payment that was booked to the wrong company, a reimbursement that was categorized as a loan, and one transfer that hit in January and was recorded in December. You will find all three. It will take the afternoon.
Every CPA who serves multi-entity owners knows that hour. It is not skilled work; it is clerical work billed at a CPA's rate, or written off. This guide lays out a reconciliation process that finds the differences in minutes instead of hours, the client-side habits that prevent most of them, and what to look for in software so that the intercompany work stops being done by hand.
Each company's books are closed separately, by different people or by the same person on different days, from bank feeds that label every movement between the client's own accounts as "transfer". Nobody is forced to decide, at the moment of categorizing, what the movement was or which counterparty it belongs to. So the same $5,000 becomes "Transfer to Maple" in Pine and "Owner contribution" in Maple, and both books are internally consistent and mutually wrong.
Reconciliation is the act of putting the two sides next to each other and forcing them to agree. The process below assumes you have the general ledger of each entity; it works with QuickBooks exports, spreadsheets, or anything else that lists transactions by account.
The reconciliation is impossible if intercompany movements are scattered across "Transfers", "Owner equity", "Loans" and "Other income". Every entity needs a dedicated account for each other entity it deals with: in Pine, "Due from Maple" and "Due from Cedar"; in Maple, "Due to Pine"; and so on. Loans get their own pair ("Note receivable, Maple" and "Note payable, Pine") separate from the running current account, because a note has a schedule and a current account does not.
If the client's chart of accounts does not have these, add them before the first reconciliation and reclassify the year into them. It is the only setup step, and it is what makes every later month fast.
Money between two of the client's companies is one of four things, and matching only works within a type. A loan disbursement matches a loan receipt; a management fee matches a management fee; a reimbursement matches the expense it moved; a capital contribution matches an equity entry. A loan disbursement in Pine that was booked as a contribution in Maple will never match, and you should not want it to; you want to fix the classification.
| Type | Sender books | Receiver books | Must exist |
|---|---|---|---|
| Loan | Note receivable (or due from) | Note payable (or due to) | Promissory note, rate at least AFR, schedule |
| Loan payment | Interest income plus reduction of receivable | Interest expense plus reduction of payable | Amortization schedule |
| Management fee | Management fee expense | Management fee income | Management services agreement |
| Reimbursement | Reduces the expense fronted | Records the expense | Invoice or receipt naming the right company |
| Capital contribution | Investment in subsidiary | Member's equity | Written consent or amendment |
Build a grid with every entity across the top and down the side. Each cell holds what the row entity says it is owed by the column entity, according to the row entity's books. The mirror cell holds what the column entity says it owes. In a clean set of books every pair of mirror cells is equal and opposite. Every pair that is not equal is a difference to explain.
For four entities that is six pairs. For eight entities it is twenty-eight, which is why the matrix has to be produced from the ledgers by a formula or a tool, not typed. Once you have it, the reconciliation is no longer "go through the year"; it is "explain these three cells".
Intercompany loans are where the biggest and most persistent differences live, because a loan payment is two transactions in one. A $1,250 payment on a $25,000 note at 6% is $125 of interest and $1,125 of principal in month one, and a different split every month after. If the client books it as a $1,250 transfer, the note balance on each side is wrong by the accumulated interest, the lender under-reports interest income and the borrower under-claims interest expense.
The fix is a schedule per note, applied to both books, with each payment matched to a line on it. Our guide to loans between LLCs has the worked entries, which you can hand to the client as the standard for how their loans are to be recorded.
Most differences are prevented at the moment of categorizing, and the client is the one categorizing. Four habits remove most of the February work.
The honest problem is that consumer-grade tools make the first habit impossible: they present the movement as a transfer and offer no way to say what it was. That is a software problem, and it is why the next section exists.
The reconciliation above is mechanical. Every step of it can be done by software if the software knows that the client's companies are related, which single-company tools do not. What to look for:
HaraPro was built around the third item first. Each client is one tenant with every entity inside, a bank payment can be linked to the specific note it belongs to, both sides update at once, and the intercompany balances agree because they are the same record seen from two entities. For firms, the CPA page describes the Partner tier, where each client gets their own tenant and the firm gets a consolidated view; there is no revenue share, only a flat fee per client. We checked QuickBooks, Xero and the consumer apps before claiming that no small-business tool links an individual transaction to the instrument behind it; if you know one that does, tell us and we will update the claim.
The process of comparing what each of a client's entities records as owed to or from every other entity, and explaining every difference, so that the mirror balances agree before consolidation and before the returns are filed.
Monthly, at each entity's close. Differences found in the same month take minutes to explain; differences found in February take an afternoon per client.
Loan payments booked as plain transfers. The note balances drift apart by the accumulated interest, and one company under-reports interest income while the other under-claims the expense.
Not across company files. Each company is a separate file, so both sides are entered independently and matched by hand or by export. Multi-entity tools hold every company in one tenant and record the transaction once.
Yes. A written note with a rate at least at the applicable federal rate and a repayment schedule is what makes it a loan rather than a contribution or a distribution, and the schedule is what the reconciliation is checked against.