Multi-entity accounting:
a definitive guide

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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.

  • What is multi-entity accounting?

    • What is multi-entity accounting?

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    Multi-entity accounting is the financial management of several business entities or locations, whether it takes place within a franchise, a large investment company, healthcare business, a family office or other types of organizations.

  • What are some key concepts in multi-entity accounting?

    • What are some key concepts in multi-entity accounting?

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    True multi-entity accounting requires the integration of processes and technologies, including:

    The ability to share master files

    Sharing accounting information, such as vendor lists and customer data, in a single database, eliminates the need to copy and paste information and reduces the risk for error that goes along with it.

    Managing intercompany transactions

    The ability to distribute line items across multiple entities, for example, managing payroll for 20 companies with a single transaction or allocating an invoice for marketing collateral across each location, is a key feature that allows you to save time.

    Reconciling bank statements across multiple bank accounts

    Bank book management can be a tedious task for multi-company organizations. Fortunately, there are solutions that enable greater efficiency in this area, such as the ability to automatically match transactions between your bank book entries and bank statements.

    Compiling business intelligence across entities or locations

    Fast-growing businesses with multiple companies need BI tools that integrate easily with existing and emerging technologies and make it easy to create personalized reports to identify trends.

    Managing transactions and reporting in multiple currencies

    In our globalized economy, even a multi-entity enterprise that doesn't have subsidiaries in multiple countries is still likely to be doing business in multiple currencies. That may include overseas inventory purchases, international sales or outsourced labor.

    Multi-currency accounting has become essential for eliminating the manual work of converting transactions into different currencies and mitigating exposure to foreign exchange rate fluctuations.

  • What are the benefits of multi-entity accounting?

    • What are the benefits of multi-entity accounting?

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    As companies strive to achieve higher profit margins with fewer resources, multi-entity accounting offers greater efficiency and the potential to reduce costs. A single person or team handling accounting tasks for each company within the larger organization, including accounts payable, accounts receivable, intercompany transactions and consolidated financial reporting. Ideally, they should be able to manage all this within a single database without the need to switch between different systems or manually consolidate data. This should improve scalability and ensure compliance with accounting standards.

    Unfortunately, many organizations lack a unified way to manage and view finances for each entity within one system, leading to manual errors, late nights compiling reports and an inability to see the company’s performance from a 10,000-foot view.

  • What are the challenges of multi-entity accounting?

    • What are the challenges of multi-entity accounting?

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    As companies strive to achieve higher profit margins with fewer resources, multi-entity accounting offers greater efficiency and the potential to reduce costs. A single person or team handling accounting tasks for each company within the larger organization, including accounts payable, accounts receivable, intercompany transactions and consolidated financial reporting. Ideally, they should be able to manage all this within a single database without the need to switch between different systems or manually consolidate data. This should improve scalability and ensure compliance with accounting standards.

    Unfortunately, many organizations lack a unified way to manage and view finances for each entity within one system, leading to manual errors, late nights compiling reports and an inability to see the company’s performance from a 10,000-foot view.

    Increased risk of errors

    Many companies start with a single Excel spreadsheet or an entry-level system, such as QuickBooks. As they grow, they have to add more spreadsheets or create new accounts for each individual entity. Because there is no way to easily share information between them, they have to copy and paste data between databases. Not only is this inefficient; it increases the chance of missing information or errors. This can lead to inaccurate reporting to investors and even penalties or fines if it’s left unchecked.

    Inability to create consolidated financial reports

    Without consolidated financial reports, your team has to manually compile data from each entity into a single report at the end of every month. This often involves many hours or even days of work, keeping your team from more strategic responsibilities, or even their day-to-day.

    Lack of business intelligence

    Being unable to see critical business insights until the end of the month also hinders your team from taking action sooner, proactively identifying growth opportunities or noticing one entity is underperforming.

  • Technology solutions for
    multi-entity accounting

    • Technology solutions for
    multi-entity accounting

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    When it comes to choosing the best multi-entity accounting software, finance teams may feel stuck between two solutions that are both ill-equipped for their needs.

    Most entry-level accounting solutions are designed to handle a single entity at a time. Even those that bill themselves as multi-entity accounting software require you to pay extra for cloud hosting or purchase integrations to enable shared business intelligence or other features that should be standard.

    Larger enterprise resource planning (ERP) systems require a significant investment that may not be feasible even for successful mid-sized organizations. They are designed to handle every possible function, from accounting and HR to sales, so it could take a year or more just to get buy-in from all departments. Implementation is also time-consuming and difficult, and over half of all ERP implementations fail.

    Gravity’s multi-entity accounting software is built specifically for this purpose. As a cloud-based accounting solution built natively on the Microsoft Power Platform, it includes all the functionality and security you’d expect from an enterprise system without the expensive price tag.

    Here’s a closer look at how Gravity’s multi-entity accounting features enables greater efficiency:

    Sharing information across multiple entities

    With Gravity, it’s easy to store financial information for all companies within your organization in a single database. You can create shared master files for customers or vendors, enabling quick data entry and effortless access control. When you update information once, the data synchronizes across all relevant entities.

    Managing accounts payable for multiple companies

    Paying vendor invoices is simple enough when you are a single entity, but it becomes more complicated when you have many locations or companies within the same organization. With an entry-level system, you need to log into each company’s database, enter its share of the invoice and repeat the process numerous times.

    With Gravity’s accounts payable solution, paying a vendor invoice on behalf of multiple companies takes a fraction of the time. You can choose how you want to allocate each bill across entities from a single screen.

    The expense is automatically listed in each company's database, and Due To/Due From records are automatically balanced. Gravity also makes it easy to pay invoices in batches, set up electronic payments, and integrate with services like bill.com.

    Simplifying bank book reconciliation

    Gravity’s automatic bank book reconciliation makes it easy to set up automatic downloads of your transactions with multiple banks and credit card companies. You can automatically match check transactions featuring the same check number and amount and reconcile hundreds of transactions at once, significantly reducing the amount of time it takes to reconcile individual entries.

    Save hours each month with consolidated financial reporting

    It shouldn’t take your team days to compile financial data from every entity into a single financial report. With Gravity, you can create personalized dashboards for your organization and export data into relevant financial reports in minutes.

    For instance, you can compare sales data for each location in one chart

    Use business intelligence to make better decisions

    Real-time business intelligence gives your company a competitive edge, allowing you to develop strategic business goals and identify new opportunities. Gravity uses Microsoft PowerBI for built-in business intelligence, making it easy to create personalized dashboards and charts with the data specific people within your organization need to see. You can give your CEO a high-level overview of performance or create reports relevant to individual stakeholders who may only have investments in a few of your many entities.

    Use accounting automation and AI to eliminate manual tasks

    With Gravity, you can automate anything from revenue recognition to bank reconciliation to sending emails to approve certain expenses. You can also take advantage of advanced features, such as AI-powered invoice processing. This frees up your team’s time to focus on more

    Multi-currency accounting

    Gravity allows users to automatically update exchange rates and complete transactions in one currency but report in another. Your company's subsidiaries can operate in their respective currencies while you create consolidated reports in your company’s primary entity. You can also add new entities, users or functionality as your company grows.

  • What are best practices in multi-entity accounting?

    • What are best practices in multi-entity accounting?

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    Choosing the right technology is an important step, but it’s only part of the equation. We’ve helped thousands of multi-company organizations streamline their processes over the years, and we’ve developed some best practices worth sharing.

    1

    Consolidate financial data

    Before moving to a new accounting system, you’ll need to consolidate financial data for each company so you can easily share information between them. Ideally, you should choose a structure that will accommodate the most complex needs. Then, you can create a generic chart of accounts you can share with all companies for shared expenses like payroll, inventory and marketing costs. For companies with specific needs, you can create unique accounts that you only share with them.

    2

    Consolidate vendors and customers

    If you’ve been managing a multi-entity company for some time, you likely have multiple lists of vendors and customers with a lot of duplicate, incomplete or outdated entries. This is a good opportunity to consolidate and clean up that list! You may need to sort your consolidated list into several smaller categories relevant to each type of business, such as consultants, maintenance providers and shipping

    3

    Eliminate redundancies

    A business with multiple entities often has redundancies, such as placing multiple orders each month for the same items at different locations. Financial reporting that correctly tracks intercompany transactions can help you identify and eliminate them.

    4

    Automate manual processes

    With Gravity, you can automate many manual accounting functions to save your team time, such as:

    • Allocating expenses or payroll across multiple companies
    • Creating accounts payable workflows to pay bills or make multiple payments at once
    • Managing approvals for purchases or ]investments
    • Recognizing revenue for subscriptions within the period it is earned
    • Foreign currency conversion
    • Setting up a workflow to send monthly personalized reports to stakeholders
  • What are some multi-entity accounting examples?

    • What are some multi-entity accounting examples?

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    With more than 3,200 customers globally, including more than 350 family office companies, we’ve witnessed many multi-entity accounting success stories.

    Here are just a few examples.

    Private Equity firm simplifies multi-fund accounting

    Brandon Capital, a leading Australian private equity firm specializing in healthcare investments, was spending a lot of time and resources on manual data entry and compiling financial reports for investors. Although it used Xero accounting software, the company’s CFO still needed to maintain separate journal entries for more than 35 investment companies within its portfolio.

    With Gravity Software, her team can create one journal entry and automatically apply it to multiple companies. They also use Gravity’s investment management ledger to record purchases and sales in multiple currencies in a fraction of the time. These changes have enabled the company to be more efficient and grow faster.

    Nonprofit streamlines purchasing approvals

    Like Brandon Capital, the British Institute of Innkeeping (BII) also struggled to create consolidated financial reports. Managing purchasing approvals and maintaining a record of every order using email was also much more time-consuming than it needed to be.

    After switching from Sage 50cloud to Gravity, the nonprofit organization saves hours each month on reporting and uses automated workflows to manage approvals with a full audit trail.

    Renewable Energy Simplifies Multi-Entity Accounting to Save Hours Each Week

    Proteus Power, a pioneer in renewable energy development in North America, specializes in solar and battery storage projects, with a growing portfolio in wind energy. With multi-year projects in the United States and Canada, they needed a solution for multi-currency accounting.

    With Gravity Software, Proteus Power has a more efficient multi-entity, multi-currency accounting system to set the stage for growth.

  • Multi-entity accounting resources

    • Multi-entity accounting resources

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    Learn more about managing multiple entities, refining processes
    and updating your technology as your organization grows.

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