As businesses grow, it’s often inevitable that additional entities will be needed. Typically these will arise from international expansion into new markets or for legal and risk mitigation. Whatever the reasons, you need to be able to prepare consolidated reports based on their group performance and position.
Our team has consolidations down pat, and we want to share our expert-level experience with you.
First things first, consolidation serves three simple but exact purposes:
Consolidations empower stakeholders to get a complete overview of the overall group
Consolidation = less paperwork. There’s less effort involved in assessing the overall group’s financial health, i.e. you don’t have to prepare a set of reports for each entity!
Consolidation cuts out all transactions that occur between entities and the parent company. These things essentially cancel each other out. Eliminating these transactions gives a simplified view of business performance.
Our CEO and Founder, Richard Francis (FCA), advocates that consolidation needs to be regular, achievable, and scalable. Let’s break that down:
- Regular: stakeholders should see regular, up-to-date and accurate information for decision-making.
- Achievable: if consolidated accounting was less time-intensive, it would be both cost-effective and a win-win for both the preparer and consumer.
- Scalable: as entities or currencies are added, they should be able to be easily folded into the existing reporting framework.
Sounds easy, right? Depending on yours or your client’s business model, consolidation can quickly become complicated using traditional methods – we’re talking spreadsheets here, with their manual transposition risk and outdated reporting options.
To make consolidation easier on you, we’re going to walk you through the basics of creating a consolidated report in Spotlight Reporting, including the process for importing data, through to visualising and sharing your first report.
Using Spotlight Reporting for Consolidations
Being able to prepare consolidated reports is a ‘must’ for advisory accountants. Spotlight Reporting was developed to not only provide faster creation of advanced management reports – great for the CFO, CEO Board and/or Advisor – but to present beautiful, understandable outputs.
For those needing consolidation functionality, Spotlight Reporting’s products offer ease of use, speed and clarity.
1. Making sense of Spotlight Multi vs. Spotlight Reporting
Before we get started, let’s talk about the differences between the two Spotlight Reporting products that can be used for consolidation:
Spotlight Reporting was designed for company consolidations. You can use it to consolidate up to 75 entities, and to create consolidated and entity comparative Profit and Loss and Balance Sheet reports.
Spotlight Multi is more suited for franchises and not-for-profits which need to aggregate up to 500 entities. Along with creating group Profit and Loss and Balance Sheet reports, you can also rank/benchmark the entities and highlight underperforming entities.
2. Build your first report
Building your first report can be daunting, but trust us, it’s easy. I’ve put together a great how-to video (3-min) taking you through the steps to build a consolidated report that will delight your stakeholders.
3. Level-up with these features
We’ve got a few tricks up our sleeve to enhance your consolidated reports:
- Spotlight Reporting will complete multi-currency conversions using xe.com when working in a multi-currency consolidated report. You can view and edit the exchange rates that Spotlight uses for converting organisations with different currencies into the group report currency.
- When you work with a group of companies, there may be situations where one company within the group sells to or buys from another. If you want to adjust your reports to account for these inter-company transactions, you can do this automatically using Eliminations.
- You can use categories to filter consolidated reports and compare entities with certain traits. For example, if you run a group report consisting of entities located around the world, you might then want to run a comparative P&L for UK branches only.
- Apply Organisation Filters so that you can also gain deeper insights into your consolidated group by filtering an entire report or a single page by an individual entity (or collection of entities) within the group.
4. Aggregation and benchmarking
Aggregation and benchmarking does not have to be a costly, slow and manual process. It should be useful, efficient and transparent.
As mentioned earlier, our specialist product called Spotlight Multi can handle aggregation and benchmarking for up to 500 entities. Spotlight Multi facilitates:
- Effective, clear reporting at head office, franchisor or accountant/CFO level
- Shareable, understandable reports for franchisees, branches or individual entities
- Specific, actionable benchmarking, exception reporting and rankings across various KPI’s
- Cross-border multi-currency conversion
- Narrative observations, highlights and recommendations for open dialogue on performance improvement.