Calling senior management of large manufacturing companies!

[Ultra Sound Guy]

A question.
If a large manufacturing company has its main sales and admin section in one European country and (say) half a dozen manufacturing plants in various other European countries, who all supply different items which them are sold through the head office, how is cashflow/payment/profit normally controlled?
1) All costs, income and profit comes into the head office so factories are just an extension.
2) Each factory produces its own items and is responsible for its own financing, making its own profit then sells to head office who then mark up the products to sell on to end-user.
3) Some other system.

Feedback from senior financial persons in similar situations would be very useful!

[JackCT]

Completely depends how their transfer pricing and revenue recognition policies are set up.

They may operate as you have stated in point one or two.

They may even have the factory entities invoice back to a completely separate entity than head office on a cost plus model to limit the earnings in different territories so that they are more 'tax efficient' with head office simply spreading its cost to the other divisions.


For what its worth, im not in manufacturing, but the same applies to a lot of industries. I believe without seeing their policies it would be impossible to say.

[Doofus]

Transfer pricing.

https://en.m.wikipedia.org/wiki/Transfer_pricing

Plus a bit of financial creativity and imagination.

[anonymous-user]

Structures that consultancies have made many scheckels from

Add in brand royalties, shared services, centralised purchasing etc and it is no wonder the hq needs that many people just to keep track

[Export56]

No fixed rules, we used overseas manufacturing to invoice central with factory cost + 5% ( transfer cost) Central sales then add margin and profit made by head office if goods sold outside manufacturing country. Money can be passed around the group to minimise tax, call it support.