This week I saw the question ” Which is the most user-friendly accounting software for consolidated reporting available across multiple locations?” posed in a particular Accountants forum and it seems there is still some debate over the easiest and best way to do this so I thought I would share some ideas.
The optimal solution will largely depend on how the core data is being prepared by each subsidiary and how easily this could be changed if required or desired. Some Accounting Systems will already have in-built functionality to prepare accounting ledgers in 2 currencies. There are affordable Mid-Market solutions such as Accounts-IQ, Twinfield and Xledger that will handle this kind of process with ease. What this does mean however is that all the companies and jurisdictions would have to sign up to use the same software in order to reap the full benefit. The potential issue with this approach is largely to do with change management, as, if you have separate finance functions operating within each local country office, they will have varying preferences and experiences which they will try to apply to the chosen solution, which could have a favourable or detrimental effect.
Another potential stumbling block with this approach can be that some countries have a prescribed Chart of Accounts. It is unlikely all countries would be able to or want to use the same one, which can cause mapping issues between countries. Outside of this, the other key consideration will be the variety of local tax requirements. Local solutions will natively be able to handle local tax requirements such as VAT, so using a single solution which might not be fully set up for a particular country can create more work in other places so there will always be a level of trade-offs in making the decision of selecting a global package.
The second option is to use local solutions in each country but the specific functionality to revalue or provide a TB in consolidation currency must be included within these. This should be possible but alternatively, you could use a more global package in countries where such solutions do not exist locally as a blended approach.
Historically most companies will perform a separate exercise to collate and aggregate the TB’s from each Subsidiary in Excel and then add in various Consolidation Adjustments in Excel to complete the Group Accounts. There are however alternative approaches available which would be more automated and avoid the use of Excel and the manual errors that can often occur with this method.
The option would be to use a Finance Reporting Tool or Analytics Package. Options may include Microsoft Power BI, Fathom, Syft, Ezora etc. and how efficient these are may depend on your technical expertise. All would give the ability to upload the TBs via Excel in a particular format. But this could involve some reformatting depending on the outputs of your respective accounting packages, which is not ideal. However, the larger analytics packages will be much more flexible in this and, in theory, you could set up an email and map each format that is sent from the local solutions directly into the system. That way, an email is simply sent to the email address, sucked up by the analytics package and then automatically included in a structured consolidation report. You can then have a Consolidation Adjustments Company to process any eliminating journals and finish your group accounts. This, if done well, “should” or potentially will provide much more professional, automated, and accurate reports than when performing this exercise in Excel.
If you would like to know more about Consolidation reporting options please do not hesitate to ask or contact one of our consultants at www.4pointzero.co.uk
Frequently Asked Questions (FAQ)
What is consolidated reporting in accounting software?
Consolidated reporting in accounting software refers to the process of combining financial information from multiple entities within a group or company. It helps create a comprehensive view of the overall financial health by aggregating data from subsidiaries, branches, or divisions.
Why is consolidated reporting important for businesses?
Consolidated reporting is crucial for businesses with multiple entities because it provides a holistic picture of the company’s financial performance. This aids in making informed decisions, understanding intercompany transactions, and presenting accurate financial statements to stakeholders.
How does accounting software facilitate consolidated reporting?
Modern accounting software streamlines the process of consolidated reporting by automating data collection, eliminating errors, and generating consolidated financial statements. It allows for real-time updates and ensures compliance with accounting standards.
What security measures should I consider when using cloud-based accounting software for consolidated reporting?
When using cloud-based accounting software, prioritize providers that offer data encryption, regular security updates, multi-factor authentication, and compliance with industry security standards to safeguard sensitive financial data.
What are the key features to look for in accounting software for consolidated reporting?
When choosing accounting software for consolidated reporting, consider features such as intercompany transaction handling, currency conversion, elimination of duplicate data, customization of reporting structures, and integration capabilities with existing systems.
