Intercompany transfers occur when merchandise is transferred from one location/division to another with the purpose of the other location/division selling that merchandise.
(NOTE: If a new location was just obtained, please contact MV Software. First, there is a licensing issue involved when a new division/location is added. Second, General Ledger accounts must be added to accommodate the transfers and for the proper allocation of inventory, sales, etc. to the appropriate division/location. And third, some programming is required to address the issues that arise from Intercompany transfers and additional division/locations.)
HOW TO PROCESS AN INTERCOMPANY TRANSFER :
First, setup a customer (using numbers 1-99 only) and a vendor (using numbers 1 - 99 only) in sequence with the division number. Example:
Set up the "customers" with a Price Type (field 13) of nine "A"'s which is the "Average Cost". A suggestion is to set the salesperson number to "50 - House Account" for the customers.
Second, once the customer is set up, using the ‘shipping’ division, go to the "Order Processing" module and enter an "order", with the customer number being the ‘receiving’ division and enter all the merchandise that will be transferred. Invoice just like a normal customer would be invoiced. The difference being, the sell prices will display the average cost on the item for a net profit of $0.00, (i.e. "at cost").
All other processing is taken care of by the system.
The inventory from the shipping division is reduced and the receiving division's inventory is increased.
The following is the net effect on the Accounts Receivable to GL interface for a warehouse transfer:
o o Records intercompany transfer.
o o Records cost of items transferred.
o o Records payment from intercompany.
The following is the net effect on the Accounts Payable to General Ledger Interface, for a warehouse transfer:
o o Records intercompany transfer.
o o Records payment on intercompany customer.
All of the debits and credits are for the same amount. After the above entries are recorded, the net effect on the Balance Sheet accounts is zero. The Income Statement accounts reflect a sale and a cost of sale for the same amount. The intercompany Income Statement accounts should be statement coded together in the General Ledger Master file. (i.e. in the cost of sales area.)
BALANCING PROCEDURES USING INTERCOMPANY TRANSACTIONS:
Order Processing Module:
At end of each day after all invoicing has been done:
Print Daily Checkout/Summary (Task 11 in the OE module), Daily Checkout Summary (Open Order file) - Sub-task 1
At the beginning of the next day:
Print Daily Checkout/Summary (Task 11 in the OE Module), Daily Checkout Summary (Holding file) - Sub task 2.
Print Invoiced Order Edit List (Task 2 in the OE Module), - Subtask 4. Report selections would be: yesterday’s date, ALL divisions, starting customer # 1, ending customer # 99. Look for the page that has the G/L account #’s or the page that has the salesman #’s. Both these pages have a column for sale and a column for cost. These two columns should be the same. If they are NOT the same the individual invoices need to be found and fixed BEFORE Posting. Once they are all correct, you can either POST these with their individual divisions, or all together.
Accounts Receivable Module:
Daily balancing -
Sales Entry & Editing (Task 1), Edit/Sales Posting Journal (Sub-tasks 4 & 5)
Cash/Receipts Entry & Editing (Task 2); Edit/Cash Posting Journal (Sub-tasks 4 & 5)
Month End Balancing
1. Sales History (Task 19); Print Selected History Records (Sub-task 4)
2. Cash/Receipts History (Task 20), Print Selected History Records (Sub-task 4)
3. System Management Functions (Task 32); Generate A/R to G/L Interface (Sub-task 3)
The interface has been programmed to automatically give the sub-totals of the real ("normal", "actual") sales and the intercompany process automates it all, so there is no need to have to figure out the totals separately.
Accounts Payable Module:
1. Voucher Entry & Editing (Task 1); Edit List/Voucher Posting Journal (Sub-tasks 4 & 5)
2. Check Account (Task 20); Print Selected Check Records (Sub-task 4)
3. Voucher History (Task 19), Print Selected History Records (Sub-task 4)
The interface has been programmed so sub-totals will print for the intercompany and "actual" (normal)payable totals, so there is no need to have to figure out the totals separately.
1. Post vouchers every day that there are intercompany transfers.
2. Force a check register every day that there are intercompany transfers.
3. VERY IMPORTANT: The Sales and Cash Posting Journals for each day of intercompany transfer dollar amounts should be exactly equal to the Voucher Posting and Check Register intercompany dollar amounts.
Subject: Performing division transfers and inter-division billing
Company has 2 stores - #1 and #2 (Stores 1 and 2 are division 1 and 2 respectively). Store 1 receives orders for service and repair jobs. Store 1 however, does not have the ability to perform repair. Store 1 forwards the job to store 2 for the work to be done.
What is the right operational process to follow?
Any correct process will involve some amount of additional work. It is important to recognize that both stores should be fairly compensated in terms of revenues and profits and also that inventory should be relieved and applied accurately.
The following process achieves this:
1. On receipt of the repair job, store 1 opens an order (#Order A) for the customer without any line items (or a generic line item) and includes memo notes on the description of repair.
2. Store 1 forwards work order #Order A and the defective equipment to Store 2.
3. Store 2 opens an order (#Order B) on the system and enters '1' for the customer number. The system now recognizes that this is an inter-divisional billing and that the customer on #Order B is Store 1. Store 2 also enters the order number for #Order A provided by Store 1 as the purchase order number on order #Order B.
4. Store 2 then completes the repair and invoices #Order B. By invoicing the order, the computer relieves any inventory from Store 2 and receives it into the inventory of Store 1.
5. Store 1 now enters the line items on #Order A as they appear on #Order B and invoices the order. This further relieves inventory from Store 1, since it is now effectively sold to the original customer.
6. A report can be run at the end of each month to determine the amount of repair work that Store 1 gives to Store 2 and apply any adjustments that is seen fit to recognize the contributions of the individual stores.