An entrepreneur does not need to worry about what an intercompany transaction is unless they own a holding company that holds an operating company says Edmonton bookkeeping. There are many reasons why an accountant would advise a business owner to structure their corporation this way. In addition to offering them a layer of protection, it also can help give an entrepreneur mechanisms to pay themselves strategically. Regardless of the reason, once an entrepreneur has their corporate structure as a holding company and an operating company, the only things that they need to worry about is keeping very accurate records.
The one thing that an entrepreneur needs to understand if they have a holding company and an operating company, is that they are going to have transactions between the two companies frequently. Whether these transactions are entering money into shareholders’ loan accounts, transferring money for payroll, or even paying a management fee, there many reasons why an entrepreneur would have various transactions between the two corporations. When this is happening in their business, they need to ensure that there keeping very accurate record for their Edmonton bookkeeping company.
The reason why they need to keep very good record for their Edmonton bookkeeping company is that there are several ways that mistakes can happen when a bookkeeper is entering into the accounting software the various transactions. For example, if an entrepreneur sends their Edmonton bookkeeping company a deposit, and does not say what the deposit is for, the most common assumption a bookkeeper might make is that it should be a deposit for the operating company that is profit. They might book the transaction that way, and they will not understand that this is an error, until they get to their year-end, and discover that things do not match.
Ultimately, entrepreneurs should be aware that their Edmonton bookkeeping company is going to need to ensure that their corporations balance at the end of the year in order to ensure that things are being done accurately. Therefore, a business owner should ensure that they are keeping area accurate record in whichever way that makes the most sense to their Edmonton bookkeeping company. Whether this is through handwritten notes put on the paperwork, regular emails, or a shared folder, there is many different ways that their bookkeeper will tell them is the best way to communicate with them to end up with clear transactions.
When an entrepreneur has an operating company and holding company, by being aware that problems can occur by not being communicative can help business owners ensure that there keeping an accurate record. Lots of business owners struggle with keeping accurate records with just one corporation, this gets increased in importance the more corporations a business owner has. By keeping good records, can help keep an entrepreneur organized, so that their Edmonton bookkeeping company ends up with the most accurate year-end possible so that they can use those accurate financial statements to make informed business decisions that can help them grow their business. Since this is an extremely important objective, entrepreneurs need to be cooperating with their bookkeeper in order to end up with accurate financial information in their business.
Edmonton Bookkeeping | What Are Intercompany Transactions
many business owners end up with a holding company holding their operating company says Edmonton bookkeeping. While they might not even understand why this is the case, many entrepreneurs actually struggle with financial literacy. Intuitís, who are the makers of accounting software quick books surveyed several entrepreneurs and small business owners in order to understand the level of their business financial literacy. They discovered that 82% of all of the business owners that responded scored less than 70% on the test. Therefore, since many business owners struggle with understanding their business finances, is as a layer of complexity when they open a corporation that owns another corporation.
Ultimately, what an entrepreneur needs to understand about owning a holding company and operating company, is that there are many occasions where there is going to be enter company transactions and transfers between corporations. There are many reasons for this including putting money into a shareholders loan account, paying a management fee, paying payroll, just to name a few. Therefore, they need to keep a very good record of all of the different transactions that are happening, even if they do not understand why. That can help their Edmonton with your company’s accurate records.
Here are some of the most common ways that their Edmonton bookkeeping company might make mistakes on intercompany bank transfers. The first one is that an entrepreneur might send the deposit to their Edmonton bookkeeping company, and they think that it is a deposit that needs to get put into the operating company, but it should go to the holding company instead. This is a huge mistake, that often will not get noticed until the bookkeeper is trying to balance in one year-end. This can create problems especially when a business owner will not have the same corporate year-endís for both corporations. Therefore, the mistake might be discovered only after the first year-end was filed. Therefore it is extremely important that entrepreneurs understand that they need to keep accurate records at all times.
The second most common mistake that happens when a business owner is not keeping track of their transactions when they give it to their Edmonton bookkeeping company is they will have missed classifications with the transfers. Things that should go into one account that is put into another and up with the inability to balance both corporations at the end of the year.
Another very common air is when a business owner is sending their business expenses to their Edmonton bookkeeping company they do not explain which corporation gets those expenses. When they mix up operating expenses for the operating company and a holding company, this can create extremely big troubles for the entrepreneur and their corporations.
By understanding how intercompany transactions work, can help an entrepreneur keep more accurate records for the Edmonton bookkeeping company so that they can end up with accurate year ends. By having accurate year ends, an entrepreneur will be able to plan their future year, and be able to plan effective ways to grow their business.