6. How to manage intercomapny invoicing between different entities of the same company?
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 dossier below:
1. How do you estimate costs, prices, and billing type for a billable project?
2. How to manage the risks of project overruns?
3. How can I get paid faster by customers?
4. How to manage complex billing arrangements
5. How do I take into account the invoicing of taxes? What about multi-currency billing?
6. How to manage invoicing between different entities of the same company (intercompany flows)
7. How can we simplify communication with customers?
8. How can I modify certain parameters that will impact invoicing during projects?
9. How to set up a project quoting and invoicing tool?
What is intercompany invoicing in accounting?
When two companies belonging to the same group lend each other resources in the context of the implementation of 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 not necessary because the resources belong to the same company. On the other hand, it is necessary to establish a follow-up that allows the turnover to be correctly distributed between the different teams or business units.
How to manage intercompany billing?
Define a transfer price
The first step is to define the transfer price between the two companies.
Please note that this transfer price cannot be freely defined. It must follow rules related to the accounting regulations of each country.
Indeed, there is a risk for the tax authorities that transfer pricing will be used to allocate turnover to the least taxed entities. It is therefore a system that is very much watched and that should not be taken lightly.
It is better to rely on the company's auditors or chartered accountants to calculate the right prices for re-invoicing between companies.
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 many criteria. It can be a price determined by the day or by the month to facilitate follow-up.
Track time spent to calculate amounts to be recharged
To establish intercompany invoicing, the transfer price must then be applied to the volume of work performed.
It is therefore necessary for employees who work for other companies in the same group to track the time spent on these projects.
The monitoring of time spent in intercompany allows finance teams to precisely calculate the amount to be invoiced and to justify these amounts in the event of a tax audit.
Deduct intercompany transactions
Intercompany invoicing therefore allows the company that has lent its resource to generate turnover in exchange for this loan. It can then count it in its results.
For the company that has benefited from the loan, intercompany invoicing represents an expense recorded in its income statement.
When the accounts are consolidated, i.e. they are made at the level of the group that owns the two companies, it is necessary to eliminate intercompany transactions.
Indeed, the turnover that has been achieved by the lending entity cannot be added to the turnover of the entity that 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 the group level) to obtain correct data.
Stafiz simplifies the management of intercompany invoices and automatically manages consolidation and intercompany eliminations.
When the intercos option is triggered, intercos are automatically calculated in Stafiz based on a collaborator's entity and the entity to which the projects they are working belong to.
If an employee belonging to entity A is working on a project carried out by entity B, he or she is automatically added as an internal subcontractor. Depending on the parameters, Stafiz calculates the amounts that entity A must invoice to the entity as it is produced B.
Intercompany invoices can be generated with one click.
Finally, the calculations in Stafiz make it possible to establish the income statements of each entity, then to calculate the consolidated amounts at the group level by making all the intercompany eliminations.
The result : reliable income statements and reporting for each entity that allows you to really read the contribution of each team and each activity.
The 9 problems of project invoicing and how does Stafiz help you solve them?
1. How do I estimate the 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 do I account for tax invoicing and multi-currency invoicing?
6. How to manage invoicing between different entities of the same company (intercompany flows)
7. How to simplify communication with customers?
8. How can I modify certain parameters that will impact invoicing during projects?
9. How do I set up a project quoting and invoicing tool?
