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Some businesses create multiple QuickBooks company files to manage separate companies or
separate divisions. Many of these businesses find that it's common to have inter-company
transactions. Sometimes it's not easy to figure out the best way to manage these transactions,
so in this article we present the solutions that seem to work best for the following common
inter-company transactions:
One company invoices the other company
A customer pays invoices from two separate companies with one check
One company sells items on behalf of the other company
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receivables and customers (or customer types) quickly, without the need to customize standard
reports by selecting complicated filters.
For example, nonprofit organizations usually track different types of receivables (grants,
contracts, pledges, dues, etc.) in their own A/R accounts. Some businesses track wholesale and
retail customers separately, and there are probably many other scenarios in which you'd find it
advantageous to use the power of multiple A/R accounts.
To make it all work properly you just need to remember to select the appropriate A/R
account every time you create an invoice or receive a payment. (Most businesses that move to
this paradigm find that after a few false starts that cause some confusion, remembering to
select an A/R account becomes a habit.)
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In this example, the customer wanted to pay an invoice from one company in the amount of
$85.60, and pay an invoice from the other company in the amount of $100.00. Because the
entire amount of the check ($185.60) was entered in the Amount field of the Receive Payments
window, QuickBooks reserves the $100.00 as a customer credit.
Everyone who wrote wanted to know how to use the credit funds to pay the open invoice in
the other company.
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3. Apply the existing credit for the overpayment to this invoice, creating a paid
invoice.
4. Save the invoice.
5. Write a check to the other company, posting it to the Other Current Liability
account that is tracking money owed to the other company.
The following postings take place:
When you create the "fake" invoice to wipe the credit, QuickBooks debits A/R
(to remove the money previously credited to the customer) and credits the
Other Current Liability account that is tracking money owed to the other
company.
When you write the check to the other company QuickBooks debits the Other
Current Liability account (washing the previous transaction) and credits
your bank account.
Now open the company file for the other company and perform the following tasks to pay
off the customer
s invoice:
1. Open the Receive Payments window and select the customer in question.
2. Enter the amount of the check you wrote in the other company, and select
the appropriate invoice to pay with this payment.
3. In the Check # field, enter the check number of the customer's original check
(which provides a clear audit trail of the transactions in case you have to
discuss these payments with the customer).
4. In the Memo field, enter a note describing your action, such as "Xfer from
OtherCompany Chk#XXX" (where XXX is the check number of the check you
wrote to transfer the money).
NOTE: If you transferred the money between the two companies electronically, use
EFT or other similar text as the check number.
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2. Post the payment to the Undeposited Funds account, not directly to the bank
account (to make it easier to reconcile the bank statement).
3. Save the transaction.
Now you must deposit the customer
s entire check. To do so, perform the following tasks:
1. Select Banking | Make Deposits, to open the Payments to Deposit window.
2. Choose this payment.
3. Click OK to open the Make Deposits window.
4. In the Make Deposits window, click the From Account column in the next
line and enter the Other Current Liability account you created to track
monies owed to the other company.
5. In the Memo column, enter a note to indicate the fact that this is a transfer
and a check is being sent to the other company.
6. In the Chk No. column, enter the customer's check number (the same check
number used for the deposit of the payment).
7. In the Amount column, enter the amount that was intended to pay the
invoice from the other company.
8. Save the transaction.
The amount being deposited now equals the full amount of the customer's check.
Write a check to the other company, posting it to the Other Current Liability account that
is tracking money owed to the other company.
Now you have to use the check you wrote to apply the customer's payment to the invoice in
the other company. To accomplish this, open the other company file, and perform the following
tasks:
1. Open the Receive Payments window and select the customer in question.
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2. Enter the amount of the payment, and select the appropriate invoice to pay
with this payment.
3. In the Check # field, enter the check number of the customer's check.
4. In the Memo field, enter a note describing your action, such as "Xfer from
OtherCompany Chk#XXX" (where XXX is the check number of the check you
wrote to transfer the money).
When you
ve finished, the postings, the customer
s payment records, the bank deposits, and
the transaction histories are correct in both companies.
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TIP: Create the generic customer name in both companies; in fact, you can use the
same generic customer name (e.g. CreditCard).
Do not store credit card numbers on your computer (except for the last four digits), because
your computer is not protected by the security features that exist on secure computers that
collect sensitive information on the Internet.
If the company collecting the money (Company#1) is not required to collect sales tax, but
the company that owns the products is reporting sales tax (Company#2), do not configure
Company#1 for sales tax. Instead create an item of the type Other Charge, name it SalesTax,
and link it to the Other Current Liability account. Add this item (and the appropriate amount)
as a line item in the transaction. If Company #2 has complicated sales tax issues (sales tax
groups that combine jurisdictions, or different sales tax rates for different types of products),
duplicate those sales tax items as Other Charge items.
WARNING: Don
t forget to add the Other Charge items you
re using for sales tax on
customer credits when you accept a return.
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