As a new SaaS CFO, multi-entity reporting can come quickly via mergers and acquisitions or international expansion. This means it’s increasingly becoming the norm for SaaS companies to operate on the basis of multi-entity accounting. However, knowing how best to proceed with that can be a tricky matter. This is especially true if you’re using QuickBooks and have to go multi-entity.
It’s frequently in the best interest of growing firms to upgrade from QuickBooks, and they may even know they should. But even so, knowing how to optimally manage the upgrade to line up with your consolidation accounting is often tough.
In this article, we’ll walk you through the essentials of multi-entity accounting and help you gain clarity on when and how to upgrade from QuickBooks.
What is multi-entity accounting?
Multi-entity accounting is a method of accounting that brings the financial statements of different entities into a single balance sheet.
It’s also known as consolidation accounting, and lets business leaders understand their parent company’s financial position based on how its subsidiary companies are performing.
QuickBooks multi-entity accounting: Is it time to move on?
You might not be sure QuickBooks multi-entity can meet your company’s needs as you continue to expand. That doubt would be very well-founded.
Here are 3 of the most important signs that will alert you that it’s time to move on from QuickBooks multi-entity accounting software.
1: Manual multi-entity reporting headaches
One sure sign that you should upgrade from QuickBooks is when your reporting starts to feel unmanageable. Manual reporting is a real drag, even for singular entities. For consolidation accounting, it can be a nightmare.
2: Currency inflexibility with multi-entity reporting
It’s increasingly the norm for SaaS companies to do business in multiple currencies through corporate subsidiaries. QuickBooks just can’t offer the same currency fluidity that automation does.
3: No approval chain for your consolidation accounting
A robust control architecture is extremely important for companies engaged in consolidation accounting. It keeps everything organized, helps prevent costly errors, and it’s a regulatory requirement.
Now let’s take a look at consolidated financial statements. What are they, and why are they a critical part of your job as a SaaS CFO? (Remember, even if your company is a singular entity now, odds are very high that that could change.)
What are consolidated financial statements?
There are two answers to that question–one official definition and one that’s a bit more casual.
The Financial Accounting Standards Board considers consolidated financial statements to refer strictly to parent-subsidiary financial statements.
However, the definition is often loosened to include the aggregate financial reporting of a business’s various divisions.
Even if your company doesn’t have any parent-subsidiary relationships, the second type of consolidation accounting would still apply to your role as a CFO.
Benefits of consolidation accounting
Consolidation accounting has a range of concrete benefits. But keep in mind, unless you leave manual approaches behind and upgrade from QuickBooks, you likely won’t have the functionality to take advantage of them.
Consolidation accounting helps with stakeholder visibility
It gives a company’s stakeholders a crystal-clear image of its total assets and liabilities. To investors, almost nothing is more important.
Consolidation accounting helps with FP&A
Effective FP&A is all about knowing where you are in the present so you can steer your business toward its brightest possible future. Consolidated financial statements are a large part of that for many companies.
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