Multi-entity accounting is a responsibility many CFOs and finance professionals acquire over time as their businesses expand to include additional companies and new locations or service offerings.
When it’s managed well, it offers many benefits, including greater scalability and diversification, but without strong business processes and multi-entity accounting software, it’s more likely to lead to added complexities and frustration.
Multi-entity accounting has become increasingly common with the recent increase in mergers, acquisitions and consolidations brought on in part by an influx of private equity cash and a recent era of historically low interest rates.
We’re seeing an unprecedented number of new franchise opportunities driving multi-entity business growth, as well. The most recent U.S. Census data counted nearly 500,000 franchise establishments, employing 10 million people.
It’s also a common practice for legal reasons. Many organizations establish individual entities to limit liability as they diversify interests and expand services.
Family offices often manage multiple companies for individuals who may share the same name but distinct investment preferences, such as art, renewable energy, real estate or technology startups.
No matter your role in multi-entity accounting, it is a distinct practice with unique challenges.
This guide addresses the benefits of multi-entity accounting, common challenges and how to overcome them.