A business needs to study a range of performance indicators to stay healthy. Consolidation reports are growing in popularity since they help businesses operate more efficiently.

The Right Time to Consolidate for a Business

There's always a turning point for a businesses to purge their current financial practices in order to move forward. This is especially the case when a parent business has several subsidiaries. So the right time to consolidate is when:

• The business wants to study their performance from a streamlined report.

• It wants to convince stakeholders of its investment potential.

• There's a need to fine tune a budgeting strategy.

• The business is launching a new acquisition strategy.

• The business is preparing for an external audit or IPO.

Financial Close

Financial close is defined as the time when all project and financing contracts have been signed and all of their stated requirements have been accomplished. Funds can be released to launch a project once this happens. The biggest challenge facing corporate reporting organizations is handling rapidly changing reporting requirements and meeting the demand to deliver this information in a faster turnaround time! Consolidation narrows the time and cost gap of financial close and reporting cycles.

Benefits of Consolidation

The main goal of any business is to see how certain decisions will impact its overall function. When a business decides to consolidate, they can experience many benefits in the short and long term. For example, a parent business may notice that one of its subsidiary company's needs to improve its sales performance. A consolidation report will either influence the parent business to improve its subsidiary's operations or terminate their relationship. Other benefits of consolidation include:

• Real-time data of business gains, losses,and present and future spending in a simplified manner.

• Clear presentation of top-level activity and bottom line encourages potential for investors and stockholders to invest in a business.

• Valuable insights to improve lagging performance rates.

• More time spent for strategic planning.

• Consolidation helps operation managers interpret reports faster.

Reading a stack of reports is time-consuming and wastes resources. It's also makes assessing the level of financial success more difficult among various subsidiaries. Arranging business reports that places a focus on key elements minimizes confusion and engages the reader.

Readers know exactly what to look for and can keep track of data when white space, color coding, bullets, charts, and graphs are used. Charts and graphs are very helpful at tying together time periods, percentages, as well as like or opposite values.

Hurdles of Consolidation

Consolidating financial functions requires more than just tallying up figures. It can become more complex when a business expands globally or when it has to compile information from several ERP or GL systems. Financial reports that reflect converted currency transactions is another big hurdle to clear. A business can easily become overwhelmed analyzing operations in multiple regions, multiple countries, and multiple departments. There are a range of issues that might need to be addressed such as:

• Minority ownership

• Uncontrolled interest

• Multi-GAAP reporting

• Intercompany reconciliations

• Internal management reporting

• External board reporting

• Regulatory filings and reporting

Financial Consolidation Reporting Using Cloud Software

A number of businesses have benefited from automation and control cloud applications. Three key things can be accomplished using cloud software applications

• It manages and streamlines the complex process of financial close, financial consolidation, and financial reporting.

• It creates minimal effort and less paperwork when assessing a parent company’s financial health.

• It removes transactions made between subsidiaries and the parent company to give a more concise insight of business performance.

Successful organizations are highly dependent on timely and accurate reporting to its stakeholders and regulatory agencies. They must always consider how their financial health will be impacted by the delivery of financial, non-financial and regulatory information on a daily, monthly, and yearly basis. Consolidation is a useful reference tool that enhances communication. Readers of consolidated reports can translate key data faster and thus be more accountable when executing future budget plans and explaining their results.

There is a multitude of different types of classifications that can be used whenever a person wants to set up a business. But the main difference between them is the varying degree of liability that they each have. Some will defer any legal action or debt onto the main owner or shareholder. Others act as separate “beings” that can hold assets in their name without any fallback to another person.

The main reason that so many types of businesses are available is that it gives business owners flexibility to modify and create different structures that best fit their needs. Sometimes, this means separating everything out into different holding companies though. That way, if any problems arise with the main entity, most of the assets will not be affected because they are owned by a separate entity.

But while this creative business planning works very effectively, it also creates a unique set of challenges regarding how to manage all the entities. So to help, the following is a list of five tips to try out:

Multiple-Entity Cash-flow Sheets

Multiple-entity companies have the ability to transfer funds between each other through the use of loans. This is advantageous because if the funds in one of them get tight, they can simply borrow some from a more profitable entity. However, handling all of the transactions can be very confusing. So each entity should have its own separate cash-flow statement and another one that is tied together with all of the other entities. This will act as a checks and balances system to make sure that all of the transactions are accurately recorded.

Connective Accounting Software

By law, each entity must have its own separate set of books. This prevents fraud and the avoidance of paying taxes. But when a company has several sets of books to maintain, this complicates the process because most types of accounting software doesn't connect the various entities together. To solve this problem, it is best to invest in financial consolidation software.

Multiple Account Monitors

Most of the entities that a business sets up act as holding companies. That means, their main job is to hold on to a key set of assets. One might be used for all the buildings. And another one could hold all the vehicles. Then, the main company simply rents out the assets from the holding company. To keep everything straight, it is crucial that more than one set of eyes reviews everything regularly. So many companies assign some of the entities to different accountants that they employ. Still, they must collaborate on all their work regularly.

Regular Review Points

A multiple-entity business should perform regular self-audits to check over all their transactions. The timing of the audits should be based on a period that falls before the closing date though. For example, most businesses close their books on the last day of the month. So they may want to set up an audit of the entire month's transactions a day or two before this. The period prior to the closing date can't be too far in advance because some of the transactions will be left out of the review. And if there are any problems with them, they can't be changed after the closing date.

Minimization of Transactions

Whenever possible, a business should avoid overusing their holding companies. This will reduce the amount of paperwork that they each have. It can also prevent the likeliness of an audit from the tax department because a holding company isn't supposed to be very profitable. If there are too many loans and payments going through it, it will appear to have a higher cash-flow than what is supposed to be reported.

In conclusion, a multiple-entity business is a unique way to protect assets and reduce liability. But it also increases the workload of the accounting staff that has to monitor all of the transactions between the entities. So it is helpful to use special software and cash-flow statements to monitor them all as separate entities while still being able to see how they tie together as a whole. Whenever possible, the transactions of holding companies should be limited too. And lastly, don't forget to do regular reviews of all the accounting work to make sure that it stays accurate.