Professional Services Groups · Track 1 · Tutorial 2 of 2

Clear intercompany items in a professional services group

The same items come round every month. This is how to clear each one in BrizoConsol, in the order that closes the month cleanly, with links to the accounting behind them.

You will needThe types set up, as in Set up intercompany types for a professional services group. The month loaded for every company.

By the endEvery typical intercompany item of a professional services group cleared for the month, with nothing left in Elimination Review.

1Know the items

Intercompany flows in a professional services group: Practice company to Practice company: Staff seconded and recharged; Holding company to Practice companies: Shared-services fees; Practice company to Practice company: Work on a client project another company bills; Holding company to Practice companies: Loans and interest — Each arrow is an item to clear every month.

Each item is cleared under the type set up for it in Set up intercompany types for a professional services group.

2Clear each item

Item	Type	How to clear it	See
Staff secondment recharges	Staff Recharges	A rule on the recharge income and cost accounts; Method 2 with FX across currencies. Only the recharge comes out: the salary stays as a group cost.	Eliminate sales, purchases and services
Shared-services fees from the holding company	Management Charges	A rule on the fee accounts.	Eliminate management charges
Work on a client project another company bills	Project Work	Document entries from the internal invoices. Check that the work in progress sits only in the company that holds the client contract.	Eliminate sales, purchases and services
Unpaid recharges and fees	Trade Receivables / Payables	A document entry at each month end. Investigate a payment in transit before signing off.	Eliminate trade receivables and payables
Loans, and their interest	Intercompany Loans	A rule on the loan and interest accounts.	Eliminate loans and interest

A rule suits an item that recurs on accounts holding nothing else; see the Automate with rules track. When the accounts also hold outside business, clear the item from its invoices and bills instead.

3Close the month in order

Load every company’s month, so the rules run on the consolidation with both sides in place.
Enter the document entries for unpaid balances at the month end.
Enter the GL entries for one-off items in the month: dividends, asset transfers, new loans.
Clear Intercompany → Elimination Review, as in Work through Elimination Review.
Check each type on Review → Month End Status, as in Check eliminations on Month End Status.

Check

On the group’s Balance Sheet and Profit & Loss with Show Entities on, every intercompany line is zero in the group column, and nothing for the month is waiting in Elimination Review.

4Read more about the accounting

The BrizoConsol blog goes through the accounting behind these items for a professional services group, with worked examples:

Financial Consolidation for Professional Services Groups: How Multi-Entity Consultancies and Practices Get Clean Group Accounts

Intercompany Staff Secondments in a Professional Services Group: How the Margin Hides in WIP and What to Do About It

Consolidating an LLP Into a Corporate Group: The Three Questions Your Standard Consolidation Pack Doesn’t Answer

5If something goes wrong

An item is still in the group figures	Its accounts aren’t in a rule or entry, or one company booked it in another month. Check both companies’ books for the month.
The same rule waits in Elimination Review every month	Its method or tolerance doesn’t suit the usual difference. See Explain and clear intercompany differences.
A rule also eliminates outside business	The account isn’t only intercompany. Delete the rule and clear the item from its invoices and bills.

Want more detail? See the documentation

Elimination Entries Elimination Review

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