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What is the best way for a subsidiary company of a public company to handle billing back expenses to Corporate? Implement a run rate?

Employees in the shared services division(such as A/P and HR) of the company have certain expenses that are charged to the subsidiary company because that is who orders the supplies or does the shipping and then the subsidiary company does inter company billing to charge corporate for the expenses. The problem is it takes a lot of time to do this bill back on a monthly or quarterly basis because there are so many line items to research especially for postage and supplies expense. The expenses that should be billed back are posted to a specific cost center however there are times when we have mispostings. An idea came about maybe we should just do a run rate and whatever the difference will be absorbed by either company. This billing back expenses has only been in place for 2 years.


Topic Expert
Regis Quirin
Title: Director of Finance
Company: Gibney Anthony & Flaherty LLP
LinkedIn Profile
(Director of Finance, Gibney Anthony & Flaherty LLP) |

Charge backs are a major source of frustration for any individual that is trying to manage a P&L. But they are necessary. My suggestion - discrete expenses that can be identified should be charged back monthly (your current process); while services should be charged via an allocation (HR, IT, Accounting, Legal). Lumping together and allocating is much easier and more timely to administer. Annually, conduct an Activity Based Costing (ABC) analysis. ABC is a process by which you attempt to identify the discrete costs associated with a product, service or process. As a result of this analysis, you should be able to determine a fee for the next twelve months.


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