Multi-entity consolidation
What is Multi-entity consolidation? Combining the books of several companies in a group into one set of group reports, after taking out what the group companies trade with each other.
In plain words
if you own several companies, each keeps its own books. Consolidation adds them up into one set of group figures, after taking out what the companies sold to each other.
Without that last step the group would count its own internal sales as real revenue.
A worked example
| Company | Revenue |
|---|---|
| Trading company (includes ₹2 crore sold to the manufacturer) | ₹8 crore |
| Manufacturing company | ₹5 crore |
| Property company | ₹1 crore |
| Simple total | ₹14 crore |
| Less the sale inside the group | ₹2 crore |
| Group revenue | ₹12 crore |
The manufacturer's matching purchase of ₹2 crore comes out of the group's costs in the same way. Further adjustments, such as profit on goods still in stock, are for your accountant. Sample numbers.
Why it matters
- Cost. Wrong group figures lead to wrong decisions on borrowing and investment.
- Deadline. Doing this in spreadsheets is often a week of work at every month-end.
- Risk. Lenders and auditors look at the group view. A company with subsidiaries usually has to prepare consolidated statements by law, and your CA confirms whether that applies to you.
How Kinnow handles it
Kinnow keeps each company separate and cancels out the internal sales.
- Separate books. Each company has its own books, chart of accounts and budgets. Group roles can see across companies.
- Matched first. Sales between your companies are posted as matching pairs, and the month cannot close until the balances between companies net to zero.
- Cancelled out. The elimination step posts cancelling entries for each matched pair into a group consolidation company. Combined profit and loss reports then leave out the double-counted sales and costs.
- Undo with a reason. A cancelled-out pair can be undone with a written reason after the consolidation period is reopened.
The honest limit. Consolidating companies that report in different currencies is not in this release. The elimination removes the matched sale and purchase; other group adjustments are not part of what Kinnow posts.
Send us a trial balance for each company and we will show the group view.
Related terms
- Inter-company reconciliation: the matching that comes first.
- Period close: where the balance check blocks the month.
- Cash-flow forecast: the group cash view.
Questions
Is consolidation the same as adding up the companies?
No. Adding up counts sales the group made to itself. Consolidation takes those out so the figures show only dealings with outside parties.
Do I need consolidated accounts for my group?
It depends on how the group is structured and on the law that applies to it. Ask your CA. Many promoters want a group view for lenders and for themselves in any case.
Does each company need its own books in Kinnow?
Yes. Each company keeps its own books, chart of accounts and budgets, and the group view is built on top of them.
Request a demo to see your companies close once, as a group.