Signs you need multi-entity accounting software
When your business grows to include multiple companies, each their own separate legal entity, it creates new challenges for your accounting team. The systems they used to manage one company often don’t work as well with multiple subsidiaries that have shared expenses, customers and vendors. You end up spending too much time trying to manually execute routine tasks, wasting time and money. Not only that, but trying to navigate this new landscape with old processes will inevitably create silos of information that inhibit future growth for your company. The key is to recognize when you’ve outgrown your old accounting solution so you can empower your accounting personnel with software that was designed to take on these new challenges. Here are the top signs you need better multi-entity accounting software.
End-of-month inter-company balancing
If your accounting team is spending too much time balancing the due to and due from account for each entity at the end of every month, that’s likely a sign you need better multi-entity accounting software. Asking your accountants to take on the labor-intensive tasks of manual data consolidation, entering vendors multiple times and opening new databases each time they need to enter an expense is simply a waste of resources. Multi-entity accounting software that allows you to automate many of these manual tasks will give time back to your accounting personnel so they can add real value by focusing on distilling financial information into actionable insights for your company.
Consolidating reports and financial statements
Financial statements and reports are supposed to give your leadership team a fast and easy way to understand the financial health of the company. But if you are spending too much time with Excel, trying to consolidate information across your whole organization, you aren't being efficient and should consider a new software solution.
“As a business owner, at a basic level you want to know what the cash is going to be in the business, what the profit is, what the revenue’s going to be, can you pay your bills and can you expand,” Brian Hamilton, chairman and founder of financial information company Sageworks, told Forbes. “And the only way to do that is to look at your financial statements.”
With a system that allows you to automatically generate reports, statements and other key assets for each subsidiary and the overall organization, you can achieve better financial management and position your company's long-term growth. Make sure any system you consider allows you to create reports quickly and easily while also providing visual dashboards so you can get the information that matters to your business.
Allocating costs across companies
Part of what makes you more efficient is the ability to allocate one bill to multiple companies in one transaction. This results in one transaction instead of multiple and the due to and due from accounts are always balanced. Quality multi-entity accounting software will allow you to easily track expenses and allocate costs across your entire enterprise. This will make you more agile as a company and better prepared to meet new challenges.
If you have multiple subsidiaries that operate in different parts of the world using different currencies, you need to be able to automatically track and convert those figures for your leadership team. If the software you’re using doesn’t have robust multi-currency capabilities, you will ultimately struggle to manage your multiple entities. Some basic accounting software solutions provide multi-currency capabilities in a general sense, but things get complicated when you need to reconcile all of your accounts for multiple business segments.
“Companies need to translate transactions denominated in foreign currencies into their functional currency. This functional currency isn’t necessarily the local currency. It’s the currency of the primary economic environment in which the entity operates,” Ian Lavis wrote for Praxity. “Financial statements of subsidiaries held in functional currencies must then be translated into the group’s reporting currency. Measuring foreign currency transactions and translating financial statements is where things get a little tricky, or interesting, for the accountants.”
So, invest in multi-entity accounting software that also includes multi-currency solutions to make life easier for your accounting personnel.
Wasting time and money
Outgrowing your basic, entry-level accounting software is a good thing. It means you’re expanding as a business and moving in the right direction. But it also means you need to adapt to continue that growth into the future. Too often, companies waste too much time and money trying to create manual workarounds for recurring problems brought on by the presence of multiple legal entities. By recognizing the signs that it’s time to invest in a new multi-entity accounting software, you can avoid common growing pains and give your accounting team the solution they need to drive better financial insights for your business.
To see how Gravity Software’s® multi-entity accounting software can help increase efficiency for your business, contact us to schedule a demo today.
Better. Smarter. Accounting.