Overview
Intercompany Billing automates the process of tracking and transferring costs such as labor and expenses between different entities, subsidiaries, or divisions within the same organization. This feature is especially useful for multi-entity companies where employees work on projects belonging to entities other than the one that pays their salary.
By automatically detecting cross-entity activities, CORE ensures accurate cost allocation, transparent internal accounting, and consistency across your financial records. Intercompany Billing can be set up in Settings > Accounting. Check the CORE Help Center article or watch this video for details.
Note: To use the Intercompany Billing feature, you need to turn on the Classes (at the employee, project and time entry level), Accounting Periods and Revenue Recognition features. You will need the Accounting subscription for this feature to work.
Key Benefits
- Accurate Cost Tracking: Ensures that costs and revenues are attributed to the correct entity
- Profitability by Entity: Enables organizations to analyze profitability and performance per entity or division
- Resource Sharing: Supports shared resources and cross-entity employee utilization
- Regulatory Compliance: Maintains a clear audit trail of internal transactions for compliance
- Discrepancy Prevention: Minimizes manual errors and internal reconciliation discrepancies
How It Works
In many organizations, employees are paid by one entity (for example, Entity A) but might perform work for another (for example, Entity B). Intercompany Billing automates this process by comparing the Class assigned to the employee and the project. If the classes do not match, CORE automatically generates journal entries to transfer the costs between entities.
This ensures that both entity accounts accurately reflect the expense and reimbursement, eliminating the need for manual adjustments and improving accuracy.
Example:
Consider a company with two offices, San Francisco and Salt Lake City. An employee named Joe belongs to the San Francisco office but logs 10 hours of work at $38.50 per hour, along with $2,000 in expenses, for a project owned by the Salt Lake City office. After these entries are approved, CORE detects that Joe's assigned class (San Francisco) does not match the project’s class (Salt Lake City).
As a result, CORE automatically creates the necessary journal entries to transfer the related costs between the two entities. For labor, a 30% markup is applied to account for benefits and taxes, resulting in a total of $500.50. The following journal entry is posted automatically:
- Debit: Salary Expense (Salt Lake City) -$500.50 and
- Credit: Payroll (San Francisco) -$500.50
A memo such as Intercompany Billing: time Entry – Joe – [date]– [activity ID] – [hours] is recorded to provide context and maintain a clear audit trail.
CORE creates one consolidated journal entry per day to transfer all costs between the employee classes and project classes. This design ensures efficient tracking in the specified Intercompany Billing accounts without creating excessive transaction volume. To maintain accurate entity-level financial reporting, always assign classes to both employees and projects. You should also remember to manually update the Paid flag when it is not updated automatically, especially if you are using it as a trigger for cost transfer. The Paid flag for time entries and non-reimbursable expenses is automatically checked only when those entries are created through a check or credit card transaction. Keeping this in mind ensures that all intercompany cost transfers are recorded accurately and remain consistent with your accounting workflow.