Top 5 things webinar: Consolidation
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So, this is the 27th in our series of monthly webinars on key areas of NAV and Business Central. You can sign up for as many as you’d like on our website. I’ll show you the list of upcoming webinars at the end of the session. We also send out regular e-mails to register for the next one.
My name is Krisy and I will be facilitating the demo today. I’m a Sales Executive here at TVision and I’ve worked here for eight months, and my background is 16 years in customer service and sales. Ian will be doing the demo today, and he’s a support consultant at TVision and has been working at TVision for nearly 4 years, and has been using NAV since 2000.
Today’s webinar is about consolidation, and this is something that we get asked a lot about, especially at the early stages of the project. Consolidation provides you with a holistic view of your company’s structure and the reporting hierarchy. Consolidation gives you the ability to analyse the performance of different sectors across your company, providing you with an overview, across your whole business to help keep you connected and make smarter decisions.
The way that a company is structured into, example, global regions, sub regions potentially can change dependent on the business strategy. Therefore, it’s good practice to understand how consolidation is set up in Business Central, so that changes can be made and the company structural reporting structure changes. This can also include when new entities are acquired or new division’s channels are created.
So these are the five top things we’re going to show you today about consolidation. We’ll provide you with an overview of what consolidation looks like in Business Central. This mainly covers how to set up different divisions for different reports in country. This is where starting to plan this before you action it, within the software. Eliminating repeated transactions – when you have the same intercompany transactions repeated transactions can occur so you will need to eliminate one of the duplicates. How to ensure missing transactions are there in both legal entities. For example, I’m in the UK company and send something to our warehouse in France and it shows an all our records, but it’s not showing in France’s records. So we need to ensure the missing transactions are there.
Exports and imports. If you are using Business Central SaaS, not all of your companies may be on the same environment, so you will have to export and import them into the parent company to be able to run your report. Multiple levels of consolidation. You have the ability to consolidate the same company multiple times and it will not affect other consolidations. For example, you have two sub regions that you want to consolidate. You can do this without it affecting others.
So before the demo, we’d like to understand what do you currently use for consolidation? NAV/Business Central setup as required. NAV/Business Central but it doesn’t actually reflect our company structure. Outside of the system, and it works fine. Outside of the system, and we have issues with it. We don’t need anything to, we don’t use anything to do consolidation. I’m going to launch the poll now. So if you wouldn’t mind submitting your answer that would be great.
So it looks….. Mostly, it looks like a good split between outside of the system we have issues with that, and it’s set up as required. So, now I’m going to hand it over to the demo. Oh! Sorry, we are just having a few issues bear with us. Great stuff, you can see my screen now.
So for today’s demo guys I’m using the latest version of Business Central. But everything that I’m going to speak about today applies to all versions of NAV and Business Central from version 4 up to the latest. So before I even start talking about consolidation, let me tell you what you can consolidate.
So you can consolidate companies, even if they have different chart of accounts and different dimensions. You can consolidate companies that have different financial years. One of them can be a months. One of them can be a week’s with different start and end date. You can consolidate a percentage of the company. So, if you only own 70% of one of the companies, you can consolidate 70% of the value of all transaction costs in that company. And if you have companies using different currencies, you can choose which exchange rates and exchange rate methods you want to use, and you can even control, to some extent, at General ledger account level at how you want those exchange rates to work.
Your companies can be in different environments, they can be on different servers, and different tenants. You can have a mixture of on premise, or Cloud companies, or software as a service companies. It can even be different versions of NAV that you are consolidating together. So you can consolidate a version five with a version 2013 with a Business Central. So consolidation is extremely flexible.
Before you start consolidating, there are some questions that you need to ask yourself and maybe some tips and steps that you can take to make your life a little easier.
So the companies that you’re going to consolidate do they transact with each other. Does company A sell to buy and buy from company B? If so, you might want to set up Intercompany transactions into company accounts before you start thinking about doing consolidation. You don’t have to, but it might make your life easier.
The Charts of Accounts for the companies that you’re going to consolidate don’t have to be the same. They can be different charts of accounts. But if they’re identical, it does make your life a little bit easier, so maybe you want to think about synchronizing all of those companies to have the same chart of accounts. And then if you do do that, what if somebody wants to create a new account in one of the companies, or somebody wants to create a new dimension? How are you going to handle that to make sure that all the companies stay in sync? So you really need somebody at your head office, consolidation company level to be keeping an eye on the things to have a procedure for how they deal with creating new accounts. And again, if you’ve got companies with different currencies, which exchange rates are you going to use? And are you going to set up a second reporting currency in your foreign currency companies to make life easier for yourself? You don’t have to do any of these things, but thinking about them beforehand can make your life a little easier when you actually start doing the consolidation.
So now getting down to the meat and potatoes of consolidation, I have a company here, this is my demo IJK company and I have a few companies setup on this server. So, let me just show you.
I have also got a demo ABC Company; my demo IJK which I made and I’m going to consolidate these two companies together and put the results in my demo XYZ company. There’s two other companies here. Cronus and my company, I’m not going to consolidate these, so I don’t have to, I can pick and choose what I want to consolidate.
So ABC and IJK I am going to consolidate into XYZ. I’m going to stay in IJK for a moment because there’s something here I want to show you. So, those three companies that I have – ABC is in euros. IJK here is in sterling. And I’m going to consolidate up into my sterling XYZ, but the chart of accounts in IJK is slightly different to the other two.
So if I go to my Chart of accounts, and if I scroll down, there are some accounts down here, let me just find one of them. So this account, for instance, does not exist in my ABC Company, and it doesn’t exist in my consolidation company. So I have to do some extra set up on this company. I tell the system, in IJK any transactions posted to account 40950 – when you consolidate, move those transactions to account 40700. So for any accounts which are different you have to tell the system where in the consolidation do I want those numbers to appear.
Um, and also, at this level, you can say when the exchange rate is in foreign currency, and I need to do some exchange rates, what type of translation method do I use? There are 4 or 5 options, I’m sorry, I’m not an accountant. I do not know the specific differences between them. So that’s something you’d have to decide with your accountant or your auditors, which exchange rate translation methods you would like to use. But basically, this is pretty much all the setup you need to do on your subsidiary companies. You just get this mapping of where does the consolidation go in the office, all the consolidating company.
So, now, let’s go and have a look at my parent company. My consolidated company. That’s going to be my XYZ company so I open it up. And again, XYZ is just my consolidation company. I’m just going to use it to report what’s happening in ABC and IJK combined. So this is an empty company.
All this company has is a chart of accounts, calendar, and some very basic setup on how to do postings. There are no customers, there are no vendors, there are no items or bank accounts. There are no resources set up, it is just a shell company as you can see here. No customers, it’s just the shell company reporting those financial transactions.
Now those two companies which I want to consolidate together within the consolidated company, they’re referred to as business units. So if I go and check, oh, my keyboard is doing weird things. If I go and check for business units, we can see here ABC and IJK are the two companies which I want to consolidate. I want to consolidate 100% of both companies. If I only want 50% of ABC, I will change this to only consolidate 50% of ABC. And ABC, you remember, I told you it was a foreign company it’s in euros. So, I’m telling the system that’s the foreign currency that all transactions in this company are recoded and they need to be converted to Sterling when I bring them in. So, that’s part of the setup that I do against the business unit.
And I say I’m going to use the local currency exchange rate rather than using an additional reporting currency. I’m going to use the exchange rate that comes from the business unit rather than the exchange rate that comes from my head office. So I’ve got choices as to which who gives me the exchange rate, the subsidiary or the head office. And then where’s the data source for currencies? Am I going to convert the euros to pounds? Or does that company have a second reporting currency, which I can use instead. So I do the set up at head office level. So it’s all pretty straightforward so far. And then if you’ve done your homework and you’ve got everything set up correctly, that’s pretty much all you need to do.
At this point, I am now ready to test those companies, make sure everything’s OK. If I click this button, it’s just going to print me out a report if it finds any errors, such as a GL Account that hasn’t being mapped or something like that. I’ve already checked, and I know it’s fine, so I can run my consolidation.
It pops up a little wizard, it asks me What dates to I want to run this consolidation for. And I’ve already run consolidation on this company, 2 or 3 times testing. I’m going to do it again now, for a fourth time, so you can do this as many times as you need to do this. You can filter and choose which business units you want to consolidate. So I’m going to leave it blank, consolidate everything. I say OK. Do you want to, Yes I do, and it’s going to go away and I don’t have many transactions, it didn’t take long. You can expect it to take 5 or 6 minutes if you’ve got some real data.
When it’s finished, it gives me a trial balance, just to have a quick look at and make sure that everything is as I expected. And you can see lots of transactions coming through from my IJK company. Let me just make that a little bit bigger so it’s easy to read. Plenty coming through from IJK, and I just posted a couple of transactions in ABC just to show that they do come through as well. And it gives me a trial balance. I can check through that and have a look.
I have seen enough of my trial balance. I now have in my XYZ company, my consolidated ABC and IJK. I can now run any of my financial reports, built my account schedules, I can run a profit and loss, or my income statement or balance sheet, I can run a trial balance. Everything is ready for me to do my report.
Um, now, as Krisy mentioned, sometimes you get duplicate transactions. So it may well be that both companies receive a copy of an invoice. They bought copy and capture that invoice, but only one of them should have done that. I can within this parent company post a journal to remove one of those transactions from the consolidation. If I do that, it’s only going to remove it in this consolidated company, in XYZ, it’s not going to go back and update ABC or IJK. So I don’t like that solution. I would much rather that ABC shouldn’t have captured this, I would much rather go log into ABC or phone the person in charge of ABC and say, please, remove that transaction. Issue a credit note or reverse the transaction, whatever it might take to fix it, then do my consolidation again. And then I can do the consolidation as many times as I need to do. I’d much rather go fix the problem at the source.
It might also be that company ABC sent some stock to IJK, one of them recorded the transfer but the other didn’t, so there’s a missing transaction. Again, I can post a journal to XYZ to report that correctly. But I’d much rather go back to IJK and say you forgot to post your half of this transaction. Please fix that. And once they’ve fixed it, I can run the consolidation here again and it will be correct. It’s not always possible to get the source of the problem, the source company, to fix the issue. Maybe their accountant’s off sick and they just don’t know that you can do it. And then you have to do something in the parent company.
So, what I’ve done here, I created a general journal, just to fix a minor issue of posting in between these two companies. And if I go back to my business units, I can show you what happens there. So, I have, we call it an elimination journal. I just created a general journal in the default batch to move some money from one business units to the other. I can preview before posting that journal, and it’s showing me here, these are the lines where I posted my journal, I can see what effect it has on the total. I can scroll down and see what it does to the overall impact of the company. If I’m happy with this, I can then close the report, go to the journal and post it, produce my financial reports from this.
One of the other things that we mentioned is, all of these companies that are dealing with today are on the same server in the same tenant in the same environment, and it’s really easy. But let’s assume this XYZ company I’ve consolidated, and now my head office is now owned by another company in America, and they need to consolidate my numbers with their numbers. They don’t have access to my databases in any way at all. So what I can do from any of my companies, I can go and export a consolidation. And in effect what this is going to do, if I run this, it’s going to export that file. Again, the same options, start date, and end date. I put in USD because my parent company is in US dollars, in my example. I’ve exported this to a file. This is a file that my parent company can import into their consolidation.
And there are two choices up here, which version. I suggest if you do that users use version 4 the newer version and it is valid from NAV 5 all the way through to the latest version. So you don’t need to go back to the old version. You can export a file. You can then e-mail that file over to your head office, and they can do a consolidation. And again, it is really easy, let’s assume one of my subsidiaries have emailed me a file. So let me go back to my Business Units. And from this page, I can choose actions… functions. I can test that file. Then, once it’s being tested and found to be a valid file, I can import that file, and it will import it into my consolidation. Again, it could be from any version of NAV or Business Central or any currency from anywhere in the world. And as I say, once you’ve got that, you can do all your financial reporting on your consolidated companies.
If you’ve done the prep work in advance, it is actually relatively easy, it’s a few button clicks, and then just checking everyone’s posted everything they should have before your produce your results. So that’s pretty much for me. Krisy, did any questions come through? And if there are, any, if you’d like to submit them, please do. And I have got one that has just come through. Can you fix a consolidation if the dates have being put in wrong? Yeah, that’s really easy. And, like I said, you can do consolidations as many times as you want.
So, if you put the wrong start and end date for bringing in your consolidation, you can completely you can do it again. You can put in the correct dates. You know, as I said, if you make a mistake, you can go back and do it again. And if you make mistake a second time go back and do it again, you’re not going to break anything about doing.
All right, I’ve got another one here. How do I know if it is best to set up a new dimension or a new consolidated company? Um, OK. Pretty easy, actually. So a consolidated company is a separate legal entity. If you set up a new company, a new shop in Leeds for example, and it’s a separate legal entity, its got its own registration number, its own company registration number. You set that up as a separate company on NAV, and then you would consolidated into your results. But if that shop that you set up in Leeds was just a branch of your current company, and its …, then you wouldn’t want to set that up as a separate company consolidated, You’d set up the dimension. I’m just gonna put all your transactions in the same company on a separate dimension. I think that’s what you were getting it wrong. Please drop us an e-mail, and I’ll explain. That’s great, I think that’s it.
So I’d like to leave you with the key takeaways that consolidation, which we hope will assist you. Before you start your consolidation take the time to understand your reporting hierarchy. It is worth time before you action it within the software. Start with the end in mind. Try to align your consolidation with your KPI reporting. How is it, divide it up, and what kind of currency do you want to report it? Have someone own the process and set up, and be responsible for maintaining it. If you make sure you review your reporting hierarchy regularly, then you can make any required changes. Maybe put some time in your diary every few months to review these. And, as always, if you’d like some help with setting up consolidation, please contact us.
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