We bill our branches from the factory within the state. Factory needs to collect payment from the branches against these invoices. Factory treats the branches as its customers.
Statutorily, we can dispatch with Delivery Note, but in our case payments are involved, so invoice is raised.
In V13 we were able to make invoices to branch but with V14 and India Complaince app, thats not possible now.
Is there a work around?
Hello Vishal,
This is something new for us and we would like more insights here.
I am really curious here and would like to understand the benefits of all of this or why you follow such accounting practices.
edit:
As a workaround, the net effect of all of this is just accounting for receivable or payable and I recommend a simple journal entry here.
This will reduce a lot of hassle for you and also do accounting the way you want it to be,
**• Why do you follow such a practice? How is it adding value?**
Proper Working capital management of different arms of the business. Each cost centre manager is responsible for his own working capital management. Factory sells to own branches and bulk buyers directly. Branches buy from factory and other similar manufacturers on basis of different considerations such as delivery, logistics cost.
Both branches and the factory are responsible for collecting from their debtors and paying their creditors. If factory doesn’t bill the branch, branch wont book the purchase and wont clear the payment as well. Similarly without invoice it wont show up in factory receivables for them to collect and use that money to pay of its creditors.
How are bank accounts created and maintained? As far as I know, Bank accounts are usually not issued branch-wise and are under the common banner and name of the company.
All our cost centre’s have different bank account. Factory can use its bank account to pay of its creditors when funds are available in that account only.
So if invoices and payments are created separately, do you mean they are transferring money from one of their accounts to another? Also, in this case, 2 payment entries are created, like paid by the branch and received by the factory.
Yes
How do you book sales? As per GST, you cannot charge GST to yourself and not report such sales in GSTR-1. Won’t your book sales be inflated?
We have branches outside the state also for which we are mandated by law to raise invoices. Cant have different treatment for branches within state and outside state.
We just dont tag the taxes for the within state invoices. Input tax is zero , output tax is also zero. No issues on compliance front, used same method during pre GST era also.
This looks much like multi-company accounting where each branch is treated as a different entity.
All branches are configured as a different cost centre in ERPNext
On workarounds
As a workaround, the net effect of all of this is just accounting for receivable or payable and I recommend a simple journal entry here.
** • Branch Dr (value of goods)**
** • Factory Cr**
Answer - Not possible to collect bill to bill. Branches pay the factory in 15 days for some goods and 30 days on most goods.
This will reduce a lot of hassle for you and also do accounting the way you want it to be,
** • It ensures correct turnover –** Instate branches are anyway billed. SO billing same state is not an issue
• Reduces duplication (sales in factory and purchase in branch) – Improves working capital management in our method. Been used successfully for 20 plus years.
• Doesn’t hamper compliance. - It does. I cant move goods from my factory without invoice as all goods in the factory premises are mortgaged to financial institutions under different credit arrangements.
The goods at the branches may be mortgaged to a different banker for similar arrangement.