How to deal with inter-business transactions

This article explains how to handle bank transactions in FreeAgent if one of your businesses lends money or makes or receives money on behalf of another of your businesses. These are also referred to as inter-business transactions.

If you have two businesses, with a separate FreeAgent account for each, and one of them lends money to the other or makes or receives payments on behalf of the other, we would recommend that you add a dummy bank account in each business’s FreeAgent account give it an appropriate name, such as 'Inter-business transactions'.

Once both bank transactions have been imported into FreeAgent via a bank feed or uploaded from a bank statement, you’ll need to explain them as detailed below. The way to explain the bank transactions in FreeAgent depends on whether one business is:

• lending money to the other business
• paying a bill on behalf of the other business
• receiving payment for an invoice issued by the other business

When there is money due from one business to another, the two dummy bank accounts should always have equal balances. However, one balance will be positive and the other will be negative.

One business lending money to another business

In this scenario, you would explain the ‘Money Out’ transaction of the business lending the money as a transfer from the business bank account to the dummy bank account created for inter-business transactions.

Then, you would explain the ‘Money In’ transaction of the business receiving the loan as a transfer from the dummy bank account created for inter-business transactions to the business bank account.

Find out more about how to explain the transfer of funds between bank accounts in FreeAgent.

One business paying a bill on behalf of another business

In this scenario, you would explain the ‘Money Out’ transaction of the business making the payment for the bill as a transfer from the business bank account to the dummy bank account created for inter-business transactions.

For the business that is recording the bill as a cost, you would first add a bill. Then, enter a bank transaction manually in the dummy bank account created for inter-business transactions as a bill payment for the bill.

One business receiving a payment for an invoice issued by another business

In this scenario, you would explain the ‘Money In’ transaction of the business receiving the payment as a transfer from the dummy bank account created for inter-business transactions to the business bank account.

For the business that issued the invoice, you would first create an invoice. Then, enter a bank transaction manually in the dummy bank account created for inter-business transactions as an invoice receipt for the invoice.