Make an inter-company funds transfer
When you are operating a number of different businesses you may need to transfer money between your businesses and then record this in Xero. Inter-company transfers should only be used to move money between your organisations. As this is not a supply of goods or services between your organisations, you don't generally need to account for VAT on these transactions. You should check this with your adviser.
You'll need to do a couple of things in different parts of Xero - the following assumes a fairly simple example of 2 companies that funds are moving between.
Chart of accounts
- Go to your chart of accounts.
- Add a new account to record the funds going backwards and forwards between your companies.
- The account should be a 'Liability', with a code number and name that you'll easily recognise as being used for company transfers, for example, 855 - Company A Inter-company Transfers. The account should have the No VAT tax rate.
- Each company you intend to move funds between should have a transfer liability account set up. If you are transferring funds between more than 2 companies you should discuss with your accountant or bookkeeper whether you should run the transfers all through one liability account or use one for each company.
Make the transfer
- Add a spend money from the company you are withdrawing the funds from (for example, Company A) and code it to the transfer liability account that you've set up.
- Add a receive money for the company receiving the funds (for example, Company B) and code it as funds received from the (Company A) transfer liability account.
Keep all of these inter-company transfers separate from any other information for your businesses. That is, use the transfer liability account you've set up rather than raising invoices that contain VAT. This will enable your accountant or bookkeeper to easily consolidate any inter-company movements at year end.
Monitor what's in the 'transfer' accounts
- Record this activity on your Dashboard.
- Edit the transfer account you've set up and check the 'Show on Dashboard Watchlist' option.