Managing branches and multiple companies in accounting

Branch versus company: the essential difference

A branch is part of the same legal entity: the same commercial registration (with a sub-registration), the same VAT number, one VAT return, and one set of financial statements for the whole company. A separate company is an entity in its own right: its own registration, VAT number, return and financial statements, and separate legal liability.

When to choose a branch

• The same activity in a new location (a second shop, a second showroom, a warehouse in another city).
• You want one statement for a customer who buys from any location.
• You want automatically consolidated reports without manual work.
• No need for separate legal liability or a different partner.

When to choose a separate company

• A different activity with different partners, or liability you want to isolate.
• Licensing or classification requirements that demand a separate entity.
• An intention to sell the activity or bring an investor into it alone later.
• The two entities are in different countries.

How to organise branch accounts

Do not duplicate the chart of accounts per branch. One chart, and the branch is a dimension set on every invoice, expense, voucher and salary. Each document knows its branch, the entry inherits it, and you can filter the income statement and trial balance by branch or view them consolidated, balancing either way. Shared accounts (the main bank, capital) stay branchless or on the head-office branch.

• A warehouse per branch, with referenced transfer documents between them.
• Branch-level permissions: a branch employee sees only their branch.
• One numbering sequence or one per branch, whichever suits your e-invoicing setup.
• Employees linked to a branch, so payroll cost appears on their branch.

How to run a group of companies

Each company has its own books, chart of accounts, fiscal year and independent Fatoora integration (because every VAT number has its own certificate). What is unified is access and administration: one account switching between companies, a user who may be an admin in one company and an accountant in another, and one subscription for the group. Financial consolidation (consolidated statements) is done with the auditor from each company’s export, eliminating intercompany transactions.

Transactions between companies and branches

Between two branches: an internal stock or cash transfer, no invoice and no VAT, because they are the same entity. Between two companies in a group: a full tax invoice like any customer and supplier, because they are separate entities before the authority, later eliminated on consolidation. Confusing the two is a common tax error.

The reports management needs

• An income statement per branch and consolidated, monthly.
• Each branch’s sales and stock, and its stock age.
• Payroll cost by branch and cost centre.
• For each company in the group: its three statements and its VAT report.