Client Industry : Company engaged in support services to its group companies
Background :
The client was a wholly owned subsidiary of an overseas foreign company and was engaged in providing management consultancy/support services to its overseas group companies. As the revenue model of the company was on cost plus mark up basis and company was providing the services to multiple group companies, the company was facing challenge in allocation of cost between group companies for the purpose of mark-up. The company’s existing accounting system was such that expenditure was not allocated to respective group companies and group company wise profitability was not available from the books of accounts maintained. Due to this the company was depended on manual working and reconciliations thereof. The company approached IBA for transformation of accounting system so that group company wise cost allocation as well as profitability can be known to the management without additional efforts outside the books of accounts.
Our Approach:
- We reviewed the existing accounting system of the company
- We implemented system of cost-centre wise accounting as per cost allocation % of group companies and each group company was allocated separate cost-centres
- We traced expenses/incomes to concerned cost-centres and posted incomes/expenses to concerned cost-centres in accounting software
- We had a discussion with the management as to what types of report was required by company on monthly basis and finalised the MIS report format
- We prepared MIS report as per decided format and shared with management on monthly basis
Outcome/Impact
The client was able to know monthly group company wise cost incurred alongwith profitability and analyse data and take important decisions.