Recovering a bill is not the same as billing for work.
A cleaner way to think about pass through costs
There is a cleaner way to think about this. Bill for the effort you actually added. Recover, do not price, what you only paid on behalf of somebody else. If arranging the payment involved real work, negotiating the lease, managing the landlord, sitting through renewals, put a small fee on the arranging. Not on the rent itself.
Effort vs Pass Through
Effort
Real work the parent actually added, such as negotiating the lease, managing the landlord and sitting through renewals. Put a small fee on the arranging.
Pass Through
What the parent only paid on behalf of somebody else, such as the rent itself. Recover it at cost, with no markup.
Two habits behind the default markup
Two habits sit behind the default markup. The first is a group treasury view that every intercompany invoice must earn a spread. The second is inertia. The template already has a five percent line and nobody wants to change it. Both are worth challenging when the intercompany ledger is reviewed at year end.
What was only handed across should be handed across unchanged.
The practical drill for the CFO
For the CFO, the practical drill is short.
The Intercompany Invoice Drill
01. Tag Every Invoice
Tag every intercompany invoice as effort or pass through.
02. Price the Effort Line
Where real work was added, price it. A markup on a real service is fine and expected.
03. Recover the Pass Through at Cost
The pass through line is recovered at cost, with no spread on top.
04. Keep the Two on Separate Rows
So the story reads clearly to any reviewer opening the file for the first time.
Effort or echoes
A markup on a real service is fine and expected. A markup on a pass through is a habit dressed as a rule. Look at your intercompany charges this week. How many are effort, and how many are echoes.
