James Hunter, CFO, AccountsIQ
Financial reporting is inherently complex and the challenge only intensifies for finance leaders tasked with managing multiple entities. Each one comes with its own systems, currencies and compliance requirements.
For group CFOs and their finance teams, the extra burden of consolidating accounts across various subsidiaries and then providing accurate, actionable data insights to business leaders can often cause unnecessary headaches. Without the right finance software, the process might not even be possible to perform in a timely manner.
Data can be fragmented and located in different business systems or spreadsheets, processing intercompany transactions can be complex. As such, decision making can be hindered by a lack of real-time data from across the organisation – and this is just one of the challenges finance teams can face.
When we conducted a survey of CFOs last year, 86% felt decisions about financial strategy took place without adequate insights – and the data showed that the problem increases as companies grow.
It’s why mid-market businesses in particular can feel the brunt of these issues. As they are often in a position of incorporating new entities or entering territories with different currencies, trying to find software that matches their needs can be a tall order.
While there are clear challenges that come from outgrowing basic accounting software, it’s often the case that mid-market companies have adopted hefty ERP systems to deal with their complex requirements. Yet not only can these be very expensive, but finance teams then realise they have way too many features and functionality for their size.
So, what are the features these companies should look out for? Here we explore three common multi-entity reporting headaches felt by finance professionals and how they can remedy them with better finance technology and processes.
- Performing accounts consolidation manually (due to complex software/lack of integration)
The nature of multi-entity reporting means mid-sized companies are often having to process more transactions and report on a growing number of entities. This requires substantial effort from finance teams to transfer multiple sets of subsidiary accounts into one consolidated view. If teams are dependent on overcomplicated software, the process of collating this data and performing complex calculations can become slow and disjointed.
Moreover, this software complexity – coupled with a lack of integration with other entities’ finance software or business systems such as CRMs – can lead teams to consolidate different entity accounts manually. With data spread across different locations, a significant portion of their time is spent rekeying data from one system into another or evaluating and correcting subsidiary account records. It’s a time-consuming and error-prone process.
This is why finding software suited to a company’s size and needs is so necessary – and with today’s technology and API connectivity, manual accounts consolidation should be a thing of the past. In fact, there are cloud-based financial management systems on the market specifically tailored towards multi-entity reporting.
In particular, these platforms allow companies to automatically consolidate all of their subsidiary accounts with a single click. This includes consolidating groups within groups and importing and integrating trial balances for entities to form a central hub of data. Such capabilities can save teams heaps of time every month and allows them to redirect their energies into providing actionable business insights.
- Navigating ownership complexities and different currencies
The trajectory of mid-market companies making acquisitions or opening up entities overseas creates added financial complexities. Ownership structures become more layered and nuanced, and teams have to carry out multi-currency reporting.
Without the right software, this can lead to some pretty tricky conversions when attempting to consolidate accounts or report on various entities within the group. Many traditional ERPs aren’t designed to accommodate dynamic ownership models or handle currency conversions intelligently. Even if they can, setting up these features can be highly technical, costly and erroneous.
Therefore, teams should look for technology that is designed to manage complex group structures and multi-currency accounting. Features like ownership percentage settings, for instance, can recognise minority interest where the ownership is below 100% and transfer these percentages for accurate group-level reporting.
Likewise, if teams adopt a system that can maintain exchange rates centrally, they can automatically convert local base currencies to the group-level base currency, or consolidate actuals and corresponding budgets for each subsidiary in the relevant base currency. This enables consistent performance comparisons and accurate group-wide reporting.
- Accessing precise, real-time insights for individual entities and the group
We continue to negotiate an economic and business landscape riddled with uncertainty. To make agile and informed decisions in this environment, businesses are in real need of both group-level insights and the ability to drill down into the performance of individual entities – and they need them in real time.
If finance teams are already struggling to cope with the two prior problems, by the time they have compiled group-level reports, they find they’re already outdated – and this can significantly impact the decisions CFOs and senior leadership take. This is down to the fact they can’t access precise, real-time insights in one location.
But if finance teams can automatically consolidate accounts for all of their entities and then access this data on an interactive dashboard, it becomes incredibly easy to send information to key stakeholders. This data can be shared in the form of real-time charts, visualisations and integrated report formats.
Some of the most sophisticated platforms blend general ledger coding with detailed business intelligence analysis to provide leaders with granular insights on financial performance across the group. For example, they can visualise performance metrics for any sub-groups, entities, departments, locations, and so on, and compare this to overall group data.
With inflation still high and new NI employer rates taking hold, this level of data insight can make all the difference in finding ways to optimise and reallocate resources to drive growth and minimise the need to make any cuts.
The remedy to multi-entity reporting headaches
Multi-entity reporting brings a whole range of added challenges to finance teams. If mid-market companies are reliant on complex software like ERP systems, they face headaches ranging from manual accounts consolidation to complex ownership and currency calculations. Imperatively, these obstacles mean teams are then hindered by a lack of real-time insight on the financial health of the company and its entities.
But the right financial management tools can stop these headaches altogether. By understanding the specific challenges and requirements that come from multi-entity reporting, companies can seek out finance software that specialises in these capabilities. The right platform will enable finance teams to automate complex multi-entity reporting tasks, work more efficiently and instead focus their time on driving high-value, strategic decisions.
