One of the biggest challenges faced by multi-entity accounting is balancing the needs of empowered decentralized organizations with the efficiency gains of centralized operations and processes. The CFO for an organization with multiple entities needs to ensure that each unit has the autonomy to operate effectively while ensuring that each unit’s data is accessible and shareable across the entire organization. Accounting for multiple entities helps in achieving those goals without much fuss. Continue to read more on accounting software for multiple entities.
What Is a Multi-Entity Organization?
A multi-entity business might contain different brands, including divisions, subsidiaries, units, branches, offices, or other entities. The parent company mainly acts as an overseer. Each entity gets operated with a high degree of independence. This generally means having different workflows, even for routine business processes like accounting.
A multi-entity company’s biggest challenge is that it rarely grows as a single organization. This might include scenarios such as:
Entities acquired through mergers and acquisitions have completely different accounting processes and software.
International branches have separate accounting principles, laws, regulations, and cultures.
Business units have always been internal, but they had to make different decisions on accounting software before the parent organization consolidated its software and processes.
What Are the Challenges of Multi-Entity Accounting?
When business entities start to pick their accounting processes or software, there’s usually a reason. They might need a specific feature that only one accounting software company offers. Finding one system that meets the needs of every entity within an organization can often be impossible. There’s also a common corporate problem of continuing to use dated legacy systems which were built over time because replacing them would mean rebuilding all of the entity’s computer systems from zero
Here are some of the everyday needs and challenges.
Integration with several business software such as timekeeping, inventory control, or point-of-sale systems.
Viewing and tracking financial performance using various divisions. The division may include by the entity, by business lines within an entity, or tracking specific metrics across entities
Intercompany who are accounting for costs and sales between other units.
What Does Multi-Entity Accounting Software Do?
Multi-entity accounting software usually provides a wide range of options for the users by simply making it easier to compile all the data and moving the entire organization into a single system to the extent possible.