🧩 The Importance of Eliminating Intercompany Transactions
Clearly when delivering a consolidated forecast to the board it's important that intercompany profits and losses have been eliminated. These profits and losses are internal to the group and as such if they were included the group P&L would present a misleading picture of the group’s results and prospects.
In the same way, loans between group companies are not with external parties, and as such have no place in the group consolidated forecast and must be eliminated.
🛠️ How Forecast 5 Simplifies the Process
In Forecast 5 each individual line of business, be they of revenues, direct costs, overheads, assets, liabilities or equity, are held in separate 'records'.
This makes it easy when preparing a group forecast as across the group companies those 'records' that hold intercompany income and expenses are separately identified and upon consolidation the user simply ticks off the relevant intercompany records in the consolidated P&L to effect the elimination.
Similarly, Forecast 5 will set off and eliminate those records on the balance sheet with identical names – i.e., “Intercompany loan – Coy A - Coy B”.
And that’s it; intercompany profits and losses and intercompany loans are eliminated.
âś… The Result: Accurate Consolidated Forecasts
By eliminating intercompany transactions, Forecast 5 helps you present a true picture of your group's financial health, enabling informed decision-making and strategic planning.
Forecast 5 makes the preparation of group consolidated forecasts simple!
