The ‘Bill Internal Transfers’ utility invoices between companies. This type of billing is used when you’ve set up a separate equipment company within your family of companies. We look at the benefits of isolating corporate assets as a legal entity separate from your other operations in our lessons on running multiple companies.
For our example, we set up a company that will own the equipment, BD Equipment. If problems arise with a project Buildomo Construction is working on, the assets owned by BD Equipment won’t be vulnerable to legal action. But they’ll still be available for Buildomo Construction to use, we just need to transfer them in and allocate the revenue and expense accordingly.
The company that owns the equipment will want revenue to balance the expenses incurred in purchasing and maintaining their fleet. The ‘Bill Internal Transfers’ utility will create accounts receivable invoices for the company that owns the equipment, with the revenue from those invoices posted to each of the equipment units. It will also create accounts payable invoices in the companies that are using your equipment. These invoices are posted to the job on which the equipment is being used, so the costs can be passed on to the client.
Internal billings are based on the 28-day rate assigned to the unit of equipment. Each unit can have a standard 28-day rate.
Each time you transfer this equipment to a job, the 28-day rate for the job will default to the standard 28-day rate for the equipment. You can override the rate for the current job.
Clearing G/L Accounts
You can optionally set up G/L accounts for reversing the invoice amounts to a G/L account used for Intercompany Billing. In this way, no money has to change hands between the two companies. You can just process a zero dollar payment to clear the invoices, and the amounts will be recorded on the company’s balance sheets. The G/L accounts are set up on the client and vendor records.
In our sample company we’ve set aside 13 as the statement group we’re going to use for all intercompany accounts. Statement group refers to the first two numbers of the G/L account. It’s called the statement group because it identifies where the account is reported in the Financial Statements.
Statement Group is a cross-company table, so this group will be available to all the companies you are running under Abio.
We have a standard accounts set up for Buildomo Construction and Buildomo Equipment.
The vendor and client will use their respective G/L account for intercompany billing. Here’s the a/r client in the BD Equipment set of books.
And here’s the a/p vendor in the Buildomo Construction set of books.
Both vendor and client must be set up the same way. If one is set up with an intercompany G/L and the other isn’t, Abio won’t let you bill internally between them. It would create an imbalance if one company is expecting a payment and the other company has written it off.
Creating an Internal Billing
Abio knows which companies are using your equipment, because you created transfers between companies. Those companies will be recorded on the equipment unit as the operating company.
Let’s look at a transfer between a company that owns equipment and one that will use that equipment on a job.
In this example, we’re transferring a Lift owned by our equipment company, BD Equipment, to our main company, Buildomo Construction. We’ll backdate it a few months so we actually owe something. We can override the 28-day rate to $2,200.
We’ve registered the transfer, so let’s bill Buildomo Construction for using our Aerial Manlift. Navigate to [g] Equipment, then [d] Bill Internal Transfers.
Abio prompts you for details of how to invoice Buildomo Construction.
We reviewed how a company’s intercompany vendor and/or client can be set up to write off intercompany billing amounts to a G/L account for that purpose. Abio will prevent you from mixing two different types of vendor and client.
So we’ll use a client that is also set up to write off intercompany invoicing.
Now we’re reading to create our invoice. Click Apply and Abio will calculate how many days since the last time the equipment in the selected range was billed, and apply the 28-day rate to determine a billing amount.
The most recent transfer is marked with this billing amount. The activity number is a hotlink to the transfer, so you can either click on that, or navigate to [g] Equipment, then [c] Equipment Transfer Entry. The third tab shows the invoice and the amount billed.
To show the invoices created by the utility, a report is displayed showing the pair of A/R and A/P invoices that transfer the costs of the equipment from the owning company to the operating company.
Notice that both invoices are net zero, because of the line item posted to the intercompany G/L accounts. When we post the zero dollar payment for that invoice, the revenue shows up in the Intercompany G/L for our equipment company.
And the liabilities.
Buildomo Construction shows the cost of renting the Boom Lift as a credit amount.
As you see, the mechanism of invoicing between the equipment company and the construction company has allowed us to adjust their Balance Sheet so the cost of the equipment is moved to the company that used it.