Thomas Born
Profit Center P/L in Intercompany scenario across different profit centers
Thomas Born · about 2 years ago · Question
Thomas Born

We have a scenario with different LoBs each represented by a cost and profit center. Usually consultants from different LoBs work on the same project. Projects are created in one company code and the consultants are in a different company code.

Our profit center structure LoB A, LoB B, LoB C is valid across the company codes. At the end of a period we want to view a profit center P/L.

For example the project is created against LoB A, and we have LoB B and C both entering 1h @ $100. (Assume charge out rate of $130).

Before running IC billing, we now have Profit Center for LoB A showing $260 profit (the $200 show as debit to Consulting and credit to IC Clearing). The other two profit centers have a 0 balance ($100 each showing as credit Consulting and debit IC Clearing).

If we now run intercompany billing (assuming no margin), it will show the $200 as income against the profit center of the intercompany sales order. However this is not a true representation. The result should be:

LoB A showing $60 profit ($260-$200) and both LoB B and C should show $100 profit. We can use the origin profit center and produce a report, which we can use as a basis for manual period end journals but we would like to automate this and ideally have the IC clearing account cleared as well as there doesn’t seem to be a process to do this.

I would think this is a common scenario and would like to know how others have solved this.