Consolidated reporting for a group: where to begin

A group of companies grows faster than its reporting. Each company keeps its own books, in its own program, with its own chart of accounts and its own list of customers. The group report is assembled once a month from spreadsheets, and by the time it is ready the month it describes is long over.

A consolidation system removes the spreadsheets. It does not remove the reasons why the numbers of the companies cannot be added together. Those have to be dealt with first.

One language for all companies

Consolidation starts with common definitions, not with software.

• A group chart of accounts or a mapping to it. Every company either uses the same accounts or has a fixed table that translates its accounts into those of the group.
• Common analytics. One list of cost items, cash flow items, business lines and projects. If one company calls an item "marketing" and another splits it into three, the group report cannot show it.
• One register of group companies. Each company of the group must be recognized as such in every database, under the same identifier.
• An accounting policy for the group. The same rules for revenue recognition, depreciation and reserves, or documented adjustments where the rules differ.

Transactions inside the group

Sales, loans and services between companies of the group must disappear from the consolidated report. This is where most of the manual work sits. One company records the sale in March, the other records the purchase in April, the amounts differ because of the exchange rate, and somebody spends days looking for the difference.

The cure is a rule and a routine. Documents between group companies are confirmed by both sides before the period is closed, and differences are settled by the companies, not by the person who consolidates.

A closing calendar

A group report is as fast as the slowest company. A calendar that says on which working day each company closes its sales, its payroll and its settlements and submits its package turns closing from an effort into a process. Start with the dates that are met today, publish them and shorten them step by step.

Then the system

Once the definitions, the rules for transactions inside the group and the calendar exist, the system has something to automate. It collects data from the accounting databases of the companies, checks it against control ratios, translates currencies, eliminates turnover inside the group and builds the reports, with every figure traceable to the company and the document behind it.

The same data then serves budgeting and treasury. The plan is made in the same items as the actual figures, and the payments of all companies are seen in one calendar.

Where to begin

Begin with one report that management reads every month, usually the profit and loss statement by business line. Agree its definitions, assemble it for all companies by the new rules, and only then extend the model to the balance sheet, the cash flow statement and the budget. A consolidation built report by report is in use from the first month. One that is designed whole often arrives when the group has already changed.