Multi-company consolidation: ensuring efficiency, accuracy and timeliness
In the absence of more modestly-priced software solutions (most are very expensive), monthly multi-company accounts consolidation is still mainly conducted using off-line methods e.g. Excel spreadsheets, which is time consuming, error-prone, and inevitably results in delays. Many of these spreadsheet consolidation procedures do not even handle the process correctly and merely “amalgamate” accounts as opposed to conducting “true consolidation”. Using Excel also limits the ability to report and analyse the consolidated accounts in a consistent manner with little or no investigative or interrogative facilities, since the spreadsheet results are “external” to the original application.
Whatever your company size, if you have more than one entity then you will likely be required to report and analyse consolidated accounts. The various requirements for consolidated reporting are set out in IFRS10 and IAS 27, more information can be found here.
There are many key aspects to consolidating company accounts; one is that they must take into account partial ownership, i.e. an ability to handle not just the minority holding, but also dates of purchase/sale or change of ownership. In addition to minority interests, you may also have a subsidiary entity which is itself a group company with its own group of subsidiaries, some of whom again, may be partially owned. This calls for multi-tier consolidations and also consolidation at the company sub-structure level, where the companies have divisions, branches, or departments within each company, and where you can see these results consolidated at the group company level.
In addition, multi-currency accounting adds another dimension, whereby any single entity may operate in numerous currencies and have multiple bank accounts in different currencies. These subsidiaries may have a base currency that differs from that of the holding company. This creates further complication in revaluing P&L accounts using ‘average period rates’ and balance sheet accounts using ‘period end rates’, and further ensuring every subsidiary is using common (centrally imposed) daily exchange rates throughout the period.
If you were to handle all of this in Excel, your spreadsheet would be bursting at the seams and become an unmanageable nightmare - and even if you can manage the complexity, it’s now very likely that it will be highly error-prone, since the Excel formulae will have very little by way of checks and balances to ensure compliance back to all the original consolidation entities. Nevermind the time consumed extracting the relevant information from the completed month end accounts and the consequent inefficiencies involved. However, if you have managed to complete the month/period end accounts (accurately) then all you need to do is close the month/period and produce the management reports, right? Ah, but what about those pesky last minute postings, adjustments and accruals? All of which require yet require another re-run. And then there’s the inevitable structural changes to be made every few months because of the group’s growth and expansion.
The good news is that a modestly priced solution which incorporates all of the foregoing features does exist within a comprehensive suite of accountancy applications specifically designed for medium-sized enterprises. Using AccountsIQ consolidation accounting software alongside its fully featured set of accounting applications ensures that the periodic consolidation process is simple, straightforward and accurate.
AccountsIQ also consolidates budgets and revised budgets up to the group level (and to any “Parent” companies in a multi-tiered consolidation). You can produce reports using budgets, revised budgets, actuals and variances rolled up from the subsidiary level with drill-down capabilities. There is also the ability to consolidate sales and purchasing data and report at the group level, again with the ability to drill down to subsidiary level. In addition, you can post intercompany transactions within the group, or adjustments at group level to eliminate intercompany profits. This will make life easier for your finance team, and helps get the accounts accurate for your business.
Pic: example group structure
Summary of AccountsIQ consolidation software
Consolidation of multiple subsidiaries (incl. sub groups)
Engineered to manage the consolidation of a large number of subsidiaries’ datasets with ease. Also handles sub-groups where the consolidated entity itself becomes a subsidiary of a large group consolidation. Ideal for complex corporate structures.
Manage complex ownership arrangements
Consolidation automatically recognises minority interests liability if the ownership interest is greater than 50% but less than 100% and creates the relevant postings in the consolidation entity.
Handle foreign currency consolidations with ease
Subsidiaries can operate in their own base currency and results are translated into the base currency of the consolidation entity, based on stored exchange rates for each reporting period. P&L accounts are correctly translated using average period rates and balance sheet accounts at period end rates.
Centrally control exchange rates
No need to waste time maintaining average and period end exchange rates in multiple subsidiaries. Central currency management enables you to maintain rates in one central table. The updates automatically propagate to all related subsidiaries using triangulation of the group stored rates.
Report on actuals vs budgets by BI analysis structure at group level
Budgets, revised budgets, actuals and variances are rolled up from subsidiary companies making it easier to view overall performance and trends across the group at any time, including BI analysis coding as well as GL chart of accounts enabling group level Business Intelligence reporting.
Simplify the posting of intercompany charges
Raise intercompany sales invoices that automatically create Purchase Invoices in the receiving company. Purchase invoices remain “unposted” until approved and coded in the receiving company. Ensures that intercompany accounts remain balanced for elimination at group level, even if balances are in different currencies.
Month end currency revaluations
Provide your team with the tools to simplify the revaluation of foreign currency bank, debtor and creditor accounts at subsidiary level based on centrally maintained exchange rates. Unrealised gains (losses) are automatically posted and base currency value of assets and liabilities adjusted prior to consolidation, facilitating elimination of intercompany balances at group level.
Group sales & purchase analysis
Consolidated sales & purchase analysis to allow group-wide financial reporting and benchmarking where common products/services involved.
Post consolidation adjustments
Make adjustments at group level to eliminate inter-company profits etc. at group level without affecting the subsidiary figures.
For more information on how you can get accurate, consolidated multi-company accounting and reporting in real time get in touch, call us on (0)203 598 7350 for a chat about your needs, or request a quote.
****Webinar on Consolidation, Multicurrency Intercompany Recharging****
If it's time to review how you consolidate your group accounts, join our Live Webinar and see how you can save as much as a week a month like customers, AES International, Salamanca Group, and Apera Asset Management.
When: Thursday 9th July at 11am BST.
Find out how Tindle Newspaper Group were able to get multi-dimensional, streamlined and consolidated reporting by switching to AccountsIQ
AccountsIQ's award-winning cloud accounting software simplifies how finance functions capture, process and report the results of multiple location businesses.
Built for the cloud, AccountsIQ is ideal for dynamic businesses that are growing locally or internationally, via subsidiaries, acquisition or through a franchising model, enabling anytime-anywhere processing, while allowing easy central control and consolidated reporting of results. Its unique consolidation engine, along with its ability to integrate with other applications, makes it easy to scale.
Today, over 4,000 companies in 85 countries enjoy 24-7 access to top level Financial Management functionality, providing smarter working practices, including integrated approval workflow app, expenses app and API integration with front end systems, while delivering simple and accurate consolidated results and a superior level of business insight.