Editor's Note: Intuit recently released its QuickBooks Desktop 2023 line-up. Murph has been evaluating various pre-release versions of these products for almost a year, spending hours communicating with Intuit personnel so we can help you learn about the new products. This is the tenth (and final) in our series of individual product articles intended to provide additional content to what can be found in our QuickBooks Desktop 2023 Product Summary.
Tomorrow we will be publishing Murph's annual "Favorite Newbies" article, where he tells you which new Desktop features are his favorites and why.
About Intercompany Transactions
Until now, businesses with multiple related companies have needed to manually create the same transaction in multiple QuickBooks company files to record intercompany financial activities correctly. This meant significant duplication of work and often resulted in errors arising from mistaken information entry.
Duplicate entries compound the complexity of multi-faceted company record-keeping. Accountants and bookkeepers struggle to ensure that transactions are correctly recorded to guarantee the accuracy of the primary company’s books.
The ability to aggregate multiple QuickBooks companies to gain a complete view of the financial status is difficult at best. As a result, companies often rely on third-party software to comprehensively view the financial health and consolidated financial reports.
Now, Enterprise Platinum, Diamond and Accountant subscribers within the US (as of v23.0 R1) will be able to create relationships between multiple QuickBooks Company files, make intercompany transactions (bills/checks) with the Related Companies and keep track of all intercompany transactions.
This feature will be especially beneficial for holding companies with multiple subsidiaries, where perhaps they handle the majority of the significant accounts payable transactions, and then typically internally bills each of the subsidiaries a representative portion of those costs.
A good example would be either mortgage payments or rent for headquarter buildings where the holding company and all subsidiaries are located.
With this new QuickBooks Enterprise feature, users will be able to bill each of the subsidiaries equitable shares of such transactions. Further development of this new feature continues, so be on the lookout for additional advancements in this functionality in future maintenance releases.
Using the Intercompany Transaction feature
This feature requires that each of the QuickBooks Enterprise Company files that will interact with each other in the Intercompany relationship have access to a shared Intuit account.
Preparing the Intercompany Transaction feature
You must create an Intercompany relationship between two different but related QuickBooks Company files. For example, this might be a parent or holding company and a subsidiary. You must also sign in to your Intuit account from both company files.
(1) In QuickBooks Enterprise, open the Parent (first) Company of two related QuickBooks Company files.
(2) Log in to your Intuit account from Company >> My Company >> Sign in (if you are not already logged in).
(3) In QuickBooks Enterprise, switch to the Related (second) Company file from File>> Open Previous company.
(4) Log in to the same Intuit account from the second company file.
Creating Intercompany Relationships
Now create the relationship between the parent (first) company and the related (second) company. You can do this from either the Company Menu Intercompany Transactions menu item or the Intercompany Transactions icon in the Company section of the Home Page.
(1) In the Parent (first) Company, Go to Company
(2) Select Intercompany Transactions
(3) Click the Create a relationship button on the dashboard
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(4) Follow the workflow to create the relationship request to the Related (second) Company.
(5) Select or Add Due to and Due from accounts for the Parent (first) company.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(6) You will then click Send Request to the Related (second) Company to become part of the relationship.
When you are done with relationship creation, the intercompany transactions dashboard displays the new relationship as Pending in the Sent for approval tab
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
Approval of Relationship by Related (second) Company
The Company file Admin of the Related (second) Company must approve (or reject) the Parent Company's pending new relationship using the Intercompany Transaction Dashboard.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(1) Open the Related (second) Company file you selected for relationship creation from the Parent (first) Company.
(2) Go to Company >> Intercompany transactions >> Relationships > Pending my approval.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(3) Continue the workflow to review, approve or reject the pending relationship with the Parent (first) Company.
(4) If you select Approve, you will have to select or add Due from and Due to accounts for Intercompany transactions.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(5) Once you are done, the Relationships status on your dashboard will change to Approved and you will receive a Relationship created pop-up message.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
At the same time, the intercompany transaction Dashboard in the Parent (first) company would now show the related (second) Company has been moved to Approved status.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
Creating an Intercompany Transaction
The following describes the steps the Parent (first) Company would take to initiate a transaction, such as a Vendor Bill (or Check) to be sent to the Related (second) Company.
(1) Open the Parent (first) company file where you set up the relationship (you can alternatively post transactions from a related company to a Parent similarly).
(2) Go to Vendor >> Enter Bills.
(3) Click on the Intercompany transactions button at the top menu right side
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(4) Continue the rest of the workflow to create a Bill transaction.
(5) QuickBooks will change the lower half of the transaction to reflect the new Intercompany transaction type. Notice that Company is listed where you would typically find Account or Item. By default, this will be your related Company; if you have more than one related Company, you would be able to choose the Company for the transaction (Note: At present, you can only select a single related company for each transaction).
(6) The Account within this new section will default to the appropriate Intercompany Account.
(7) When you finish, click Save & Close or Save & New.
(8) Once saved, the transaction is posted in the Sent for Approval section of the Parent Company’s Dashboard and the Pending section of the related (receiving) Company dashboards.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
Related (second) Company's Approval/Rejection of Transaction
The Related (second) Company receives the transaction within the Pending section of their Intercompany transaction Dashboard and would normally approve (but can reject) the transaction from the Parent (initiating) company.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(1) Open or switch to the Related (second) Company you selected for Intercompany transactions.
(2) Go to Company >> Intercompany transactions >> Go to Transactions > Pending my approval.
(3) You will see new bills or check transaction requests from the Parent (first) Company.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(4) Continue the workflow to Approve or Reject the transaction.
(5) Selecting the appropriate Expense Account for the type of transaction being recorded.
(6) Normally you would Approve (but you can Reject) the transaction from the Parent company.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
(7) The transaction is posted to the Approved or Rejected section of the Dashboard as applicable. If approved, the corresponding journal entry may be viewed from the entry within the Approved section of the Dashboard.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
Back in the Parent (first) Company, the Intercompany transactions Dashboard shows the pending transaction to the second Company now has moved to the Approved tab and marked Approved.
The transaction is transferred to the rejected section and labeled as such if rejected.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
Intercompany Transaction Reporting
There is a new report available for Intercompany transactions. You can access this from the View Reports option under Intercompany transactions (Company >> Intercompany transactions >> View Reports).
The report will list all of the Intercompany transactions across your related companies.
Source: Image taken from a Pre-release version of Intuit's QuickBooks Enterprise v23 Accountant.
I'm confident that the team working on Intercompany Transactions will have additional reporting available to users of this new feature based upon specific requirements reported to them from users who adopt this functionality.
So remember to submit your Feedback via QuickBooks Enterprise. You also can submit your comments using the link below this article, and we will compile viable suggestions and pass those along to Intuit's team.
Murph's Impressions
While this is a great new QuickBooks Enterprise feature, it will require some getting used to it.
Accountants, bookkeepers and ProAdvisors have established various ways to handle intercompany transactions, and this new method combines both transactions and journal entries to accomplish the task.
It will take time for users to adjust to how this new feature performs the task; however, in the long run, I believe users will find that it saves them time when they have multiple interrelated businesses sharing postings across common payables.
To learn more about this QuickBooks 2023 Desktop feature:
Please attend our September QB Talks webinar, scheduled for 2 p.m. (EST) on Sept. 21, 2022. Laura Madeira will bring you "A First Look at QuickBooks Desktop 2023." Laura develops this year's QuickBooks Desktop training content and exam materials for Intuit, so nobody is more knowledgeable about the new features. You can REGISTER HERE for the webinar.
Disclosures
Materials within this feature, including graphic illustrations, were developed from various pre-release versions of QuickBooks Desktop 2023. Therefore, the final product version you may acquire may appear, act or be functionally different from that illustrated or described herein.
Portions of this feature were adapted from Intuit QuickBooks Desktop 2023-related content. All such source materials were adapted by Insightful Accountant solely for educational purposes.
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