6. How to manage invoicing between different entities of the same company (interco flow)
In this article, we explore how to present taxes in invoices: VAT or other types of taxes. Discover the links to all the articles in the file below:
1. How to estimate costs, prices and billing type for a billable project?
2. How to manage the risks of project overruns?
3. How to get paid faster by customers?
4. How to manage complex billing arrangements
5. How to take into account the invoicing of taxes? and multi-currency billing?
6. How to manage invoicing between different entities of the same company (interco flow)
7. How to simplify communication with customers?
8. How can certain parameters be modified during projects that will impact invoicing?
9. How to set up a project quote and invoicing tool?
a. What is interco billing?
When two companies belonging to the same group lend each other resources within the framework of carrying out a project, this loan must generally be invoiced through intercompany invoicing.
Within the same company, this type of loan can also take place between different teams. Billing is then not necessary, because the resources belong to the same company. On the other hand, it is necessary to establish monitoring which allows the turnover to be correctly distributed between the different teams or business units.
b. How to manage interco invoicing?
i. Define a transfer price
The first step is to define the transfer price between the two companies. Please note, this transfer price cannot be freely defined. It must follow rules linked to the accounting regulations of each country.
Indeed, there is a risk for the tax authorities that the transfer price is used to distribute turnover to the least taxed entities. It is therefore a device that is widely watched and should not be taken lightly. It is better to rely on the company's auditors or accountants to calculate the correct transfer prices.
Generally, the transfer price is based on a cost of the resource to which a mark-up is applied, the percentage of which varies according to numerous criteria. It can be a price determined by the day or month to facilitate monitoring.
ii. Track time spent to calculate amounts to be re-invoiced
To establish interco invoicing, you must then apply the transfer price to the volume of work carried out. It is therefore necessary for employees who work for other companies in the same group to track the time spent on these projects.
Monitoring time spent in intercompany allows financial teams to precisely calculate the amount to be invoiced and to justify these amounts in the event of a tax audit.
iii. Interco eliminations
Intercos invoicing therefore allows the company which lent its resource to generate turnover in exchange for this loan. She can then count it in her results. For the company that benefited from the loan, interco invoicing represents an expense recognized in its income statement.
When the accounts are consolidated, that is to say they are done at the level of the group which owns the two companies, it is necessary to eliminate the intercompany. In fact, the turnover which was achieved by the lending entity cannot be added to the turnover of the entity which carries the project and the invoicing to the final customer. It is therefore necessary to deduct this turnover, as well as the margin made by the lending entity (which is neutral at group level) to obtain correct data.
Stafiz simplifies the management of interco invoices and automatically manages interco consolidation and eliminations.
When the intercos option is triggered, the intercos are automatically calculated in Stafiz based on the entity of a collaborator and the entity to which the projects on which they work belong.
If a collaborator belonging to entity A works on a project carried out by entity B, he is automatically added as an internal subcontractor. Depending on the parameters, Stafiz calculates as its production progresses the amounts that entity A must invoice to the entity B.
In one click, interco invoices can be generated.
Finally, the calculations in Stafiz make it possible to establish the income statements of each entity, then to calculate the consolidated amounts at group level by making all the intercompany eliminations.
Result : reliable income statements and reporting for each entity which allows you to really read the contribution of each team and each activity.
The 9 problems of project invoicing and how Stafiz helps you solve them?
1. How to estimate costs, prices and billing type for a billable project?
2. How to manage the risks of project overruns ?
3. How to get paid faster by customers?
4. How to manage complex billing arrangements
5. How to take into account the invoicing of taxes? and multi-currency billing?
6. How to manage invoicing between different entities of the same company (interco flow)
7. How to simplify communication with customers?
8. How can certain parameters be modified during projects that will impact invoicing?
9. How to set up a project quote and invoicing tool?
