What is Single Entity vs. Multi-Entity Accounting?
A single entity can be one business, department, or operating unit within a business, whereas a multi-entity business could be a parent company, holding company, or conglomerate with various subsidiaries. Multi-entity businesses can also apply to a single company, if the organization operates with various departments, segments, operating units and regions as separate entities for accounting.
It is very common, particularly in medium to large companies to have multiple subsidiaries, business units or satellite offices, often in other countries. This poses several challenges for CFOs, controllers and other senior finance managers at a head office of a multi-entity organization.
One of the challenges is how to control or effectively monitor transactions in each of these distinct entities when the entity can be in different countries or different time zones. Without proper monitoring, these separate entities can spend over their budget, make data entry errors or be subject to theft and fraud.
Manual Multi-Entity Financial Consolidations
Accounting practices for a single entity will often not work for multi-entities for tasks such as period-end closing and reporting, as well as maintaining regulatory compliance. Without a way to consolidate this information, it becomes increasingly difficult for decision-makers to get a big-picture view of the company’s financial health.
Manual, spreadsheet consolidation is error-prone for multi-entity consolidations. Links between spreadsheets could break, resulting in a loss of function and errors. In addition, critical data can be lost without proper back-ups. Manual consolidation processes can cause further delays due to time-consuming manual entries. If there are multiple people closing period-end across entities, this increases the chance of errors and delays reporting to a head office of a multi-entity organization.
If you are using email and spreadsheets to share information, manual entry and collaboration does not happen in real-time. This can cause further delays, if there are late entries or other adjustments required to complete the financial consolidation at the end of a period.
Automating Multi-Entity Financial Consolidations
With the acquisition of new businesses, geographic growth, product lines or when there is a need for security between divisions, multi-entity companies need to add additional companies or databases within an ERP to accommodate their growing structures. The resulting process can be inefficient and increase the risk of data errors. For example, copying the master records and chart of accounts from one database belonging to one company to another database of another company. This manual process has a high probability of data errors.
With growing companies, multi-entity software automation can speed up accounting processes, help ensure data accuracy and consistency across all databases, and facilitate regulatory compliance. Automation ultimately helps multi-entities with more accurate and timely financial consolidations.
Why We Need Multi-Entity Accounting?
Complex or high growth businesses operating as a conglomerate, parent company or holding company with several subsidiaries have a multi-entity accounting model. However, even single-entity businesses with regional offices or segmented departments would also need multi-entity accounting.
The original accounting system for a single-entity becomes more inefficient with new locations or departments added. As transaction volumes grow, more data, multiple entities in separate data files and using spreadsheets for consolidation becomes extremely labor intensive.
Multi-entity accounting software for ERPs can solve these complexities by:
- Providing visibility for the head office into the accounting of remote subsidiaries and departments.
- Allowing immediate consolidated financial views and to easily move from soft close to period close.
- Posting intercompany transactions automatically across multiple entities.
- Adding new subsidiaries quickly by creating a matching chart of accounts and master records.
- Getting real-time reporting and analysis with instant roll-up reports or consolidations.
- Auditing all transactional data, workflow documentation and approvals, as well as journal entries easily.
- Multi-Entity Gaps for Microsoft Dynamics ERPs
When multi-entity companies close their accounting records for a period end, such as a year or quarter, head office would need to log into each entities’ accounting system and post entries for each entity. This can be time-consuming if the parent company has many entities.
To eliminate inter-company entries, consolidation needs to be in a single financial report. Doing elimination entries for many subsidiaries or departments in a timely manner for a period or year-end financial reporting would not be possible without increasing head count at the head office. To solve this, a multi-entity accounting solution is required.
Microsoft Dynamics GP does not have a multi-entity feature. Microsoft Dynamics 365 Business Central has a multi-entity feature, but its functionality is limited. Dynamics Independent Software Vendors (ISVs) can solve this multi-entity accounting gap.
Multi-Entity ISV Solution for Microsoft Dynamics GP
ISVs have developed a number of add-ons and vertical specific solutions, to complement or enhance the existing Dynamics GP standard modules. An example of a specialized ISV Dynamics GP add on for real-time multi-entity accounting is from Binary Stream.
Binary Stream’s Multi-Entity Management (MEM) for Dynamics GP eases the burden of intercompany transactions and financial reporting for multi-entities, which reduces cost and time to present financial reports. The strength of MEM is the ability to report across multiple databases in Dynamics GP, such as sales, purchasing and finance.
Benefits of Multi-Entity Management for Dynamics GP
In 2004, Binary Stream introduced Multi-Entity Management (MEM) for Microsoft Dynamics GP. MEM is a mid-market solution that has helped organizations improve efficiency, save money, streamline processes, while maintaining data security and integrity.
MEM on Dynamics GP does the hard work of accurately posting the due-to and due-from journal entries across multiple General Ledgers inside a single Dynamics GP instance, while still upholding role-based permissions. Retrieving the information means not having to navigate multiple windows and sets of information.
With a single, centralized database, MEM on Dynamics GP allows businesses to run transactions for all payables and receivables through a central office, let each entity manage its own transactions, or a combination of both.
Instead of spending days to weeks closing a period-end, MEM on Dynamics GP help close in hours, and with far less human error. MEM on Dynamics GP allows you to upgrade a single database for all entities, instead of individually upgrading each entity’s database. By automating consolidated financial reporting for the division and for the company as a whole, this significantly streamlines the time it takes to run period or year-end reporting.
Role-based Multi-Entity Accounting Solution
MEM allows multi-entities to extend their ERP with real-time consolidated financials, with permission-based security for user-access and reporting. MEM solves key pain points for various roles:
CFOs / Senior Financial Managers:
- Accurate and timely internal and external reporting
- Secure and efficient distribution of reports
- Efficient use of finance staff
Controllers / Staff Accountants:
- Timely and accurate completion of period end closes
- Ease of use of accounting software
- Reduce cost and risk to all systems
- Control upgrade costs
- Improve data security
Whether your firm is growing by acquisition or expansion, Multi-Entity Management (MEM) makes adding a new company to your accounting set-up a breeze. MEM on Dynamics GP allows head offices to have real-time visibility on transactions across their different entities as well as consolidate financials.
Get real-time insight into your company’s health with rolled-up financial reports across all your companies
Single database gives ability to centralize the processing of payments, receipts, payroll invoicing, and purchase orders
Can be deployed in the cloud, in a hosted environment or on-premise.