We have multiple group entities wholly owned by a UK holding company. One of the UK entities (UK Ltd) buys "stock" from suppliers. They are not physical stock, they are vouchers for telecoms airtime.
Most billing to customers is from UK Ltd to customers worldwide. There are particular exceptions, the main one being a subset of customers must be billed via a US entitity (US Inc) for licencing / legal reasons.
At the moment for each US Inc sales transaction, an intercompany PO and sales invoice from UK Ltd is raised. This seems like overkill to me and I want to rationalise that to a periodic (probably montly) transaction. I intend to automate the process , identfying the relevant transactions should be simple enough.
Question is, does this have to be a sales invoice? Is there any reason why this could not be handled with simple stock adjustments and relevant month end journals? Intercompany sales transactions means the transactions always have to be elimiated from managament accounts, etc.
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Is there a VAT group in place? if not do you need a VAT invoice?
If you do need to invoice it, it is probably worth setting up separate GL codes for interco sales/purchases and trade debtor/creditor balances so they disappear on consolidation
Unless I am missing something you will need the sales shown in accounts for your individual company accounts to be true and fair as it has made sales to the US company.
It will need eliminating on consolidation which is just a fact of having a group with inter group transactions.
I'm aware that entries are required on both sides which require reconciliation and elimination on consolidation. I only want to know if the transactions must be processed as sales invoices and if so, why? Is there any reporting standard which insists on or recommends this? They are not commercial transactions, at the end of the day it is just a way to shift cost between two entities.
Surely some schedule would be adequate. We don't report these as sales in either internal management accounts or external financial accounts, so why treat them as sales?