Managing organizations with multiple subsidiaries and locations can be complex, especially when it comes to procurement and billing. NetSuite addresses these challenges with its Centralized Purchasing and Billing feature. This feature is particularly valuable for businesses operating with multiple legal entities under one parent company, providing a unified method for procurement and billing that reduces costs and improves cash flow. 

What Is Centralized Purchasing and Billing? 

NetSuite’s Centralized Purchasing and Billing has revolutionized the traditional approach towards purchasing and billing, which historically consisted of each subsidiary managing its own vendors, negotiating its own contracts, and issuing its own purchase orders (POs). This process often caused fragmented data and missed opportunities for quantity discounts. 

With centralized purchasing, a single purchasing entity—typically the parent company—can procure goods and services on behalf of multiple subsidiaries or locations. Companies can then receive this centralized purchase order in any subsidiary and location. Similarly, with centralized billing, the parent company can receive a consolidated bill from a vendor and then bill the appropriate portion of the expense to each subsidiary. The feature also allows for central creation of vendor return authorizations, fulfillment of the return from child subsidiaries and locations, and finally, a central credit of the return. 

Key benefits 

1. Increased purchasing power

   By aggregating demand across subsidiaries, companies gain more leverage during vendor negotiations. Suppliers are often willing to offer better terms, lower prices, or more favorable payment terms when dealing with larger order volumes.  

2. Improved operational and financial efficiency

   When vendors send bills to the centralized purchasing subsidiary, NetSuite automatically allocates the expense to the correct subsidiaries based on predefined rules or the original purchase order. This not only reduces human error but also accelerates month-end-close processes by providing accurate financial data across the organization. 

3. Simplified intercompany transactions 

   Centralized billing automates intercompany journal entries and bill creation. When one subsidiary purchases on another’s behalf, the system generates the necessary intercompany transactions to ensure proper accounting on both sides, eliminating the need for manual tracking and reducing reconciliation challenges.  

4. Complex procurement landscapes

   Organizations with multiple contracts per vendor, vendor deposits and rebates, and electronic payments can all leverage these concepts and apply them to multi-subsidiary vendor relationships, even in instances where procurement is localized. More comprehensive central planning and coordination can result in material impacts when vendor interactions are consolidated across entities. 

Process overview 

At a high level, the flow for Centralized Purchasing and Billing is as follows: 

1. Purchase request: The parent subsidiary identifies a need and creates a purchase request. 
2. Centralized purchase order: The parent subsidiary consolidates requests and issues a purchase order to the vendor. Target subsidiary and target location columns appear in line items on the PO’s Item subtab.  
3. Item receipt: NetSuite breaks down centralized purchase orders into individual item receipts, each aligned with the designated subsidiary and location specified in the order. Each receipt links to the designated subsidiary and location once the items from a centralized PO are received. 
4. Vendor bill: The vendor sends a bill to the central entity. NetSuite can automate intercompany cross charges between the target and billing subsidiaries. 
5. Subsidiary payment: Each subsidiary can either reimburse the parent company or have the transaction settled through NetSuite’s intercompany cross-charge process. Real-world applications 

NetSuite’s centralized purchasing and billing is ideal for: 

• Retail chains with multiple store locations that rely on a centralized procurement team 
• Manufacturers with distributed plants but a single procurement department 
• Companies that purchase non-inventory items, such as fixed assets, for multiple entities 
• Current NetSuite clients in search of an alternative to the Shared Vendor Bill or Transaction Line Distribution SuiteApps 

NetSuite’s Centralized Purchasing and Billing feature is a gamechanger for multi-subsidiary organizations aiming to streamline operations, reduce costs, and gain better financial control. By consolidating procurement and vendor billing into a unified process, companies can improve compliance, speed up reconciliation, and enhance overall efficiency. As businesses grow and expand across regions and legal entities, centralizing these functions becomes not just beneficial, but essential. 

Reach out to the CohnReznick team to learn if your company can benefit from Centralized Purchasing & Billing.