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Overview

Inter-company (IC) transactions are common in multi-entity groups, but they can distort consolidated financials if not properly eliminated. Francis supports elimination, but it relies on IC transactions being clearly identifiable. To simplify this, we recommend setting up separate GL accounts specifically for inter-company activity.

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Basics

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IC transactions

IC transactions happen when two or more entities within the same group do business with each other. Common examples include management fees, intercompany loans, or internal sales of goods and services.

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Addressing IC transactions in financial models

In a consolidated model, these transactions should be eliminated to avoid double counting. For example, internal revenue and corresponding expenses should net out to zero. The goal is to reflect only third-party activity in the group-level financials.

See the eliminations guide for more information.

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How to structure IC transactions in your accounting system

Use separate accounts for intercompany activity. We recommend creating dedicated GL accounts for intercompany revenue, expenses, payables, and receivables. This applies to both sides of the transaction.

With separate accounts, IC transactions are easier to identify and map to distinct line items in your Francis model. This structure makes it straightforward to apply eliminations consistently, and ensures cleaner, more reliable group-level reporting.

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Dedicated accounts per entity pair

When your group includes more than two entities, we recommend creating separate IC accounts for each entity pair. For example:

  • DK - UK
  • UK - FR
  • DK - FR

This level of detail is important for reconciling inter-company balances and easily identifying if amounts are off.

If all IC transactions across the group are recorded in shared accounts, it becomes difficult to track whether eliminations are accurate. You lose visibility into which entity relationships are mismatched or incomplete.

This especially becomes important for cross-currency IC transactions, as small differences between balances are expected due to exchange rate fluctuations. If entity pairs are not separated, it becomes impossible to investigate differences.