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Dynamics 365 Community / Forums / Finance | Project Operations, Human Resources, ... / Legal Entity Vs. Busin...
Finance | Project Operations, Human Resources, ...
Suggested Answer

Legal Entity Vs. Business Unit RE: Accounts Payable

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Posted on by Brady Burnett 5

I am a novice with Dynamics and am acting as business analyst for the accounting and finance implementation work to put in Dynamics 365 Finance and Operations for our company:

Installed product version : 10.0.28 (10.0.1265.20)

Installed platform version : Update52 (7.0.6441.41)

Our company is a construction company that sells residential homes to individual buyers.  Our company has three categories of legal entities (2 for construction, 1 for Legal and contract purposes, and greater than 50 for development and specialized purposes - This last category has far fewer transactions per entity than the first category), all with a shared chart of accounts and that share a vendors list, but that use different banks for payment of accounts payables.  We are implementing the Supply Chain module, Project Operations module, and the Finance and Operations module.

We are attempting to streamline the purchasing and accounts payable processes.

Desired Results:

  1. AP user does not have to click into a separate Legal Entity to process payments for a separate legal entity
  2. Purchasing does not have to maintain multiple lists of vendors
  3. Purchasing can create purchase orders for different Legal Entities
  4. AP can input invoices against PO's for the several Legal Entities
  5. AP does not have to manually choose which Legal Entity or Bank is used when processing a payment to a vendor against an invoice and purchase order

We are considering the pros and cons of two setups: Legal Entity setup vs. Business Units/Financial Dimension setup 

If anyone has any insight into the ways we can make the end user process easier while also minimizing customization and facilitating consolidated financial reporting I would be greatly appreciative.

I have the same question (0)
  • Suggested answer
    Ramit Paul Profile Picture
    Ramit Paul 22,797 Most Valuable Professional on at

    Hi,

    You may consider the centralized payment approach to align your business process, however this process will create intercompany control account transactions.

    All other desired requirements you motioned can be fit.

    Let us know if you need further details on it.

  • Brady Burnett Profile Picture
    Brady Burnett 5 on at

    As I am a novice in every way, would you be able to provide more information about how to implement centralized payments? Some questions:

    1. In order to use centralized payments, does each legal entity need to be set up as a legal entity as opposed to a business unit/financial dimension?
    2. Is the meeting of all the other requirements able to be done with the centralized payments solution?
    3. How would the centralized payments solution facilitate the single vendor list requirement (point 2 in my desired results list)?

    Your help is appreciated.

  • Kamalkumarax Profile Picture
    Kamalkumarax 89 on at

    You should try the Dynamic P2P Process. Ot is very simple and fullfill your all requirements. Use the global journal for payment processing

  • André Arnaud de Calavon Profile Picture
    André Arnaud de Cal... 301,037 Super User 2025 Season 2 on at

    Hi Brady,

    Choosing between a legal entity or a business unit would need more validations than only your requirements. You have to check with your accountant about how to deal with voucher and invoice numbers. How to deal with sales invoice numbers in a single legal entity? How to do regulatory reporting? Do you need to do e.g. Tax reporting per company separate? Are all companies in the same country?

    Centralized payments as mentioned above is working great if you have a single bank account managing payments across multiple legal entities. As you mentioned you are using multiple bank accounts, you would need to create a payment proposal anyway. In that case, it doesn't make a difference to do it in one LE or various different LEs.

    Your point 5 is something I would challenge. Somewhere in the process someone should think of which legal entity or business unit should be used. To make the process very smooth and use a single legal entity, you would need additional customizations.

    To get a thorough advise taking in considerations all variables and legal requirements, I would suggest to hire a consultant. I have dealt with scenarios like this before and it is not wise to rely on one question and some answers on a public forum.

  • Brady Burnett Profile Picture
    Brady Burnett 5 on at

    Andre, thank you for the thoughtful response.  

    Yes, we have multiple consultants on the effort, yet it seems we are getting conflicting suggestions on how to move forward.  

    I have a couple of questions regarding this statement: "As you mentioned you are using multiple bank accounts, you would need to create a payment proposal anyway. In that case, it doesn't make a difference to do it in one LE or various different LEs."

    Scenario: There is a single D365 legal entity as an umbrella.  Various legal entities are configured as business units/financial dimensions under the umbrella legal entity.  Purchase orders are being entered and tied to the various legal entities through the use of business units/financial dimensions.    Invoices are being entered against those purchase orders and then the accounts payable rep needs to create a payment against the various invoices.  Each legal entity needs to use its own bank account to create a payment for its own invoices.

    Questions: Are you suggesting that in this scenario, the process of creating the payment proposal would be the step through which the bank would be chosen?  In your experience, is this a manual step or triggered by the use of the business units/financial dimensions?

  • André Arnaud de Calavon Profile Picture
    André Arnaud de Cal... 301,037 Super User 2025 Season 2 on at

    Hi Brady,

    The payment proposal can contain lines for various bank accounts, but you would need to create the files per bank account. In a similar scenario, the customer wanted to have a journal per bank account. As it was limited to only 5 bank accounts, it was manageable without customizations, but the user had to know how to get the correct vendor payments in the correct journal. There were some saved queries which helped the user, but still they had to choose the correct one.

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