Converting internal transfers into invoices: when and why it is needed for financial accounting
As a retail network expands, its branches often become financially autonomous: they may belong to different Sole Proprietorships, have their own budgets, or even operate in different currencies. A standard transfer of goods from one warehouse to another is no longer suitable in such a situation because it does not create financial obligations.
This raises the following questions:
"How should settlements between our own stores be recorded if they are registered as different Sole Proprietorships?",
"Why is the purchase price of goods not recorded for a specific store when the goods are transferred there?" and
"How can goods be transferred to a branch in another country that uses a different accounting currency?".
To handle these tasks, Torgsoft provides a special mode for converting an internal transfer into outgoing and incoming documents.
What is the difference between a standard transfer and conversion?
A standard Internal Transfer is a warehouse operation that simply moves a physical quantity of goods from one accounting center to another. The goods remain the property of the retail network; only their actual location changes.
However, when you use the "Convert into outgoing and incoming documents" action in the internal transfer form, the software cancels the standard transfer and creates two complete documents instead:
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An outgoing invoice from the dispatching store.
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An incoming invoice for the receiving store, with the accounting centers involved in the operation recorded.
This action fundamentally changes the status of the operation from a "warehouse" transaction to a "financial and commercial" transaction.
Financial autonomy and settlements between branches
The main purpose of converting transfers into invoices is to create a goods-and-money balance between business units.
In Torgsoft, settlements and debts are recorded only between counterparties such as suppliers and customers, based on incoming and outgoing invoices. A standard transfer does not create a debt owed by the receiving store to the dispatching store.
When your stores operate as autonomous business units, for example, when each store director operates as a separate Sole Proprietorship and calculates their own profit, you need to record the "sale" of goods from the central warehouse to the store. After the transfer is converted into an incoming invoice for the receiving store, the store has a clearly recorded debt to the central warehouse, acting as the supplier, for those goods. This allows owners to see exactly how much each branch owes for the goods received and to record payments against these invoices.
Correct cost calculation by accounting center
Incorrect cost values after transfers are most often caused by the settings of the cost calculation method.
Conversion is essential when the software is configured to calculate cost using the "Latest purchase price" method and the level of detail is set to "By accounting center" rather than for the entire retail network.
Under Torgsoft rules, with these settings, the same product may have a different cost at different accounting centers depending on its latest purchase specifically for that store. If you perform a standard internal transfer, the goods will arrive at the new store without an accompanying "incoming document". As a result, the store's latest purchase price for those goods will not be updated.
For this reason, Torgsoft specialists emphasize that when the latest purchase price is calculated by accounting center, standard internal transfers between accounting centers are strongly discouraged. To ensure an accurate calculation, use the "Convert into outgoing and incoming documents" button. This provides the receiving store with a complete incoming invoice that records the new purchase price at its warehouse.
Note: for large databases, the Torgsoft developers have significantly optimized this conversion process, making it approximately eight times faster to prevent system freezes and deadlocks during bulk transfers.
Transferring goods between databases with different currencies
Another common question is how to transfer goods to a branch located in another country that uses a different national accounting currency, for example, from Ukraine to Kazakhstan or Poland.
A standard transfer will not work in this case because the currencies are different. Torgsoft handles this as follows: you create an internal transfer and then save it to a special file with the .iie extension. In the receiving database, you then load this file into a standard Incoming Invoice.
Because this is now an incoming document, the software will request the exchange rate for conversion into the local national currency. After the file is loaded, all retail, wholesale, and purchase prices will be recalculated automatically according to the specified exchange rate. The transfer is therefore effectively converted into a purchase while maintaining accurate financial records in the other country.
Summary
Converting an internal transfer into invoices is necessary when:
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The branches of the retail network are autonomous legal or financial entities registered as different Sole Proprietorships, and clear settlements must be maintained between them while controlling outstanding debts.
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The software is configured to calculate cost using the "Latest purchase price by accounting center" method. Conversion allows the system to record the cost of goods received at a specific store correctly.
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Goods are transferred to an independent database that uses a different national accounting currency, requiring conversion through an incoming invoice file.
Using this tool helps business owners avoid financial confusion, maintain accurate analytics, and make accounting across an extensive retail network transparent and controlled.
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