4 Best Practices for Overcoming Multi-Entity Accounting Challenges

4 Best Practices for Overcoming Multi-Entity Accounting Challenges

As a nonprofit organization, you likely have multiple legal entities that operate independently but are related in some way. This can make accounting and financial reporting more complicated, especially when it comes to consolidating information from multiple entities. However, with careful planning and execution, you can overcome these challenges and maintain accurate and timely financial statements. 

Multi-Entity Accounting Challenges

Multi-entity accounting doesn’t have to be an over-complicated process, but unfortunately for many membership and association organizations; it becomes just that. Separate offices, accounting teams, software, and reports can make for slow processing time largely due to the following reasons.

Time-Consuming Processes

Membership and association organizations that have multiple locations or more than one legal entity operating under their own umbrella face different challenges than nonprofit organizations with a simpler business structure. Multi-entity accounting requires a series of time-consuming steps to properly track and reconcile each transaction.

In order to produce one consolidated and accurate financial statement for the parent organization, financial transactions must be tracked and exported from multiple locations. The accounting and finance teams in these organizations spent countless hours manually inputting and reconciling data only to export it and reconcile it later.

Difficult Reconciliations

Bank reconciliations and balance sheet reconciliations take up a significant percentage of the finance team’s work hours in a multi-entity organization. A great deal of time during the reconciliation process is spent researching variances and correcting errors. As reconciliations are completed at month-end, accountants struggle to find answers to questions about variances that stem from transactions that may be up to a month old.

Accounting departments working with more than one set of reports and more than one team are forced to put current tasks on projects on the back burner while they work through last month’s inconsistencies. 

Inconsistent Policies

Often members and association organizations with more than one entity have separate accounting teams. Since each entity functions independently of one another, each accounting and finance team adopts its own set of standard policies and procedures.

In a multi-entity organization, the parent company or executive team is forced to spend many hours extracting data from each set of financial statements and creating a consolidated financial package. Companies with inconsistent policies produce inconsistent reports, which significantly slows down the consolidation process. 

4 Solutions For Overcoming Multi-Entity Accounting Challenges

While it’s no secret that multi-entity accounting comes with its own set of challenges, there are solutions. Hiring the best in the business and utilizing all the tools in the business is the first step in overcoming inconsistent policies, time-consuming reporting, and inaccurate reconciliations. Here’s how:

Prioritize Transparency

Nonprofit organizations are created for a larger purpose than earning profit. The entities exist to serve their members and communities, so transparency is not negotiable. To keep the nonprofit and tax-exempt statuses of the organization, financial reporting and performance metrics must be shared with members, contributors, lenders, and even the IRS.

In multi-entity organizations, transparency requires more effort than in single-location businesses because the same information is not available to all parties. One way organizations prioritize transparency is to work with an outsourced expert accounting team that organizes the organization’s data through software, like Sage Intacct, that provides real-time visibility from any device, at any location, to all approved parties. 

Consolidate Databases

In multi-entity organizations, departments are not always created equally. Since often new locations are set up at different times, consolidating databases becomes a challenge for finance leaders.

Membership and association organizations can achieve consolidation by segmenting accounting tasks at each entity so that the parent accounting team can easily retrieve transactions and perform necessary actions in consolidated batches. This type of consolidation requires a lot of manpower if you are operating on outdated software, like QuickBooks, or relying on manually updated spreadsheets, like Excel.

Having access to the latest, robust, cloud-based accounting system allows tasks like frequent invoicing, email campaigns, and monthly bank reconciliations to be performed one time instead of once at each location. 

Customize Resources

Each level of a membership and association organization develops its own processes over time and begins to rely on preferred resources. The reporting styles, data-entry methods, and recording of transactions are executed in ways that are customized to each entity. Connecting each entity through one accounting service, like JFW Accounting Services, or working in the same client portals creates unity and promotes consolidation, but it still allows for each module to be customized for maximum efficiency. 

Trust the Experts

As organizations reach multi-entity structures, it is more important than ever to use a consolidated, real-time, accounting system. However, overhauling each location’s accounting software is not always possible and is rarely the most cost-effective method. Membership and Association organizations can benefit from the customizable tools, consolidated reports, and real-time visibility of high-efficient programs like Sage Intacct through their outsourced accounting team

While it’s difficult to trust the future of your organization’s financial health in the hands of an outsider, working with the accounting experts at JFW Accounting Services can streamline your multi-entity accounting processes and save your organization precious time and money. Driven by powerful tools, like Sage Intacct, your organization can benefit from the same expedited monthly closes and automated processes like journal entries that the finance team at Deseret Mutual Benefit Administrators saw.


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