Credits and billing
Splitting the cost between group companies
When one company pays and three use it, and it has to be justifiable.
In a group it is common for one company to contract and the others to use. It works fine until someone — the tax adviser, an audit, a minority partner in one subsidiary — asks for the split to be justified. And then you need a criterion and data behind it.
The three ways to split
| Criterion | When it fits | What you need |
|---|---|---|
| By actual usage | When use differs a lot between entities | The breakdown by organisation or area |
| By a fixed key | When use is similar and a split would be arguable | A written, stable criterion (headcount, turnover) |
| Mixed | Part fixed, part by usage | Both, and the reasoning |
Important
What does not work is having no criterion. Splitting "as always" with no document explaining it is what gets questioned in an inspection or when a new partner joins a subsidiary.
How to back it with data
- 1
Separate what can be separated
If each entity is its own organisation, consumption is separated at source.
- 2
If they share one, separate by area or team
It allows attribution without splitting operations.
- 3
Pull the data for the same period you bill
Monthly with monthly. Reconstructing at year end is where discrepancies appear.
- 4
And write the criterion down, once
With a date. Changing it later is legitimate; changing it without a trace is not.
Watch out
If you are considering separate organisations solely to split costs, think twice: running five organisations costs more than the split it solves. Separate for other reasons, and use the breakdown for the split.
What the adviser usually asks for
With those three the split defends itself. Without them, every financial year reopens the argument from scratch.
Worth knowing
Beyond the split, the breakdown does something almost nobody looks at: it reveals that one area accounts for half the total. That information is more useful for managing than for billing.
›Can each entity have its own balance?
If they are separate organisations, yes: each holds its own.
›What if a subsidiary leaves the group?
With separate organisations it is clean; if they shared one, the separation needs planning.
›Is an equal split acceptable?
If usage really is similar and it is written down, it is a valid criterion.
A real case
The situation
A group splits the cost equally between four companies and one objects.
What you do
- Pulls the usage breakdown by area for the last quarter
- Writes a mixed criterion and applies it from the next period
What you get
The split stops being argued and the company that barely used it pays accordingly.
The situation
Cost is split equally between companies.
What you do
- Checks each one's real consumption
What you get
The split rests on data.
The situation
One group company says they spend less.
What you do
- Shows them their consumption breakdown
What you get
The conversation closes on the figure.
The situation
Each company wants its own control.
What you do
- Separates consumption by organisation
What you get
Each one sees their own.
The situation
The split is done by hand every month.
What you do
- Checks the breakdown already calculated
What you get
The close stops taking an afternoon.
The situation
A new company joins the group.
What you do
- Adds its consumption to the same breakdown
What you get
The split keeps working the same way.
This article answers
- recharging cost to subsidiaries
- splitting costs between group companies
- justifying usage per entity
- intercompany billing of shared services