Branch – What it is, definition and concept

A branch is a commercial or industrial company that depends on a parent company and can be located within the same country or outside of it.

In the same way, a branch becomes an expansion of a company, a branch maintains a dependent relationship with the parent company; they are generally located in specific places or regions where the parent company wants to expand its operations.

Undoubtedly, the process of opening branches is a mechanism used by some companies that hope to expand their operations to achieve greater growth, as well as to obtain a better position in the market.

On the other hand, branches are used to open new markets in other regions of the same country or to enter international markets.

Important points to understand the activity of a branch

Some of the important aspects to consider to understand how a branch works are:

1. They must follow the statutes of the parent company

However, the branches have the power to represent and negotiate the goods and services manufactured by the parent company or the main company on which it depends, but for this it must be governed by all the statutes that have been created and generated in the company of which said branch is subject.

2. Keep your own accounting

In addition, the branches keep all their corresponding accounting records and documents independently, which are only combined with those of the parent company at the end of the year.

3. Limited decision-making capacity

On the other hand, they can only make decisions on the matters in which they have been authorized, the rest of the decisions must be consulted with the parent company or be governed by the fully established statutes.

Branch 1
Branch activity

Branch functions

Since the branches represent an alternative that companies use to expand, the branches serve these companies to have a closer relationship with their customers, greater control of their points of sale and achieve a more solid financial structure to increase their size and scope.

Functions of a branch

Among the main functions of a branch we have:

1. Selection and hiring of personnel

So, a branch is responsible for selecting the right personnel to perform the job tasks within the company; Therefore, they determine the contracts that must be formalized in accordance with the laws of each country, establishing both the rights and the obligations that correspond to the worker and the company.

2. Billing and collection

Whereas, billing is the process by which the company issues the corresponding invoices, complying with the tax laws and regulations of the country in which it operates. It is also responsible for collecting money owed from customers.

3. Register of accounting operations

Then the branches make all the entries in the books and accounting documents to record the inflows and outflows of money from the company. These economic movements of money are recorded in the accounting as a debit when money is discharged and as a credit when money is entered.

Accounting entries must also be made in accordance with the current commercial code of each country.

4. Sales and credit processes

Of course, the sales process implies that the branches deliver the goods and services to their clients as property, in exchange for the price that the client is willing to pay to obtain them.

In the same way, the credit allows the client to take possession of the product in exchange for assuming the commitment to pay it in parts or agreed installments, over a period of time.

5.Deliver products to customers

In relation to the delivery of products to customers, it is also the responsibility of the branch, since it is the one that is closest to them; This task must take all adequate planning and logistics to comply with deliveries in an optimal way in terms of the time used and the fulfillment of the quality of the products.

6. Buying from suppliers

In the same way, if supplies are needed to operate, the branches make the corresponding purchases from the suppliers, seeking to find the best prices, deliveries on time and obtaining the inputs with the best standards.

7. Receive products and money from the parent company

Likewise, they are recipients of both money and merchandise, money allows them to finance them in order to operate and the products are the goods that they commercialize. Without money and products, a branch could not function and be competitive in the market.

8. Product transformation

Also, on some occasions it is their responsibility to carry out the transformation of products, because if the parent company carries out a series production, it cannot alter its production times to adapt the products to the demands of consumers. For that reason a branch performs this process.

Functions of a branch

In conclusion, we can affirm that a branch always acts in a subordinate way, in relation to the parent company; both in the legal, fiscal and economic fields.

Apparently, branches are an alternative widely used by companies to enter new markets and expand their process of expansion and continuous growth, in the field of national and international competition; since in this way they manage to have a greater coverage within the market.

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