If you’re in search of a comprehensive and powerful solution for managing financial data across a suite of subsidiaries, NetSuite should be at the top of your list. In this article, we will explore the worlds smoothest consolidation feature as offered by NetSuite. I’ll teach you all you need to know about NetSuite consolidation, how to leverage it effectively, and highlight why NetSuite stands head and shoulders above its competitors in addressing this critical need.
Consolidation reporting is a vital aspect of financial management for organizations with multiple subsidiaries. It allows you to aggregate financial data from various entities and present a unified and accurate view of your organization’s performance.
Traditionally consolidation can be time-consuming, error-prone, and cumbersome. Even businesses with complex accounting systems sometimes find themselves exporting the various entities in to Excel and consolidating there.
NetSuite consolidation revolutionizes the way organizations can tackle this complex task. It enables accountants to streamline and automate the consolidation process beyond what they might have thought possible.
NetSuite Consolidation is a robust and scalable solution that sits seamlessly on top of your global accounts. The term ‘click of a button’ is massively overused in this industry but here it is justified. In moments, users can move between child entities and consolidated reporting with the system translating intercompany affects and differing base currencies instantly.
In the sections to follow, we will explore the intricacies of NetSuite’s Consolidation reporting.
What is Consolidated Reporting?
Consolidated reporting refers to the process of combining the financial information from multiple entities into a single, comprehensive view. It eliminates the need to analyze individual entity reports separately and enables stakeholders to assess the overall financial health, identify trends, and make informed decisions based on a holistic understanding of the organization’s financial position.
If you operate a group of companies, each of those will have their own financial accounts. There will also be a parent entity sitting at the top of the group which may have transactions running through it.
It is important to operate those entities separately, including the parent. However, to get a complete picture of the group you need to roll all those transactions in to one and view their net effect.
The NetSuite Consolidation reporting process allows this to happen seamlessly at the click of a button. Entire accounts can be rolled up to multiple points of consolidation and translated across currencies, formats and accounting context.
The NetSuite Consolidation Reporting Process
NetSuite consolidation is rooted in the subsidiary set up. The following example gives us two points to generate a consolidated view.
There is one child subsidiary sitting beneath Netherlands. We may be interested, therefore, to see the consolidated books for Netherlands and its child, Amsterdam Trading.
We will also be able to consolidate the Netherlands group with the Parent Company. This will also include the accounts of subsidiary United Kingdom.
If we view a standard Balance Sheet report, you can see these options available on the Subsidiary drop down.
This selection is found on all standard reports in NetSuite. No manual calculations are required. If I select Netherlands (Consolidated) and refresh the report, in an instant I will see the net view of Netherlands and Amsterdam Trading.
Another way this can be viewed is as columns for each individual subsidiary and a Total column for the Consolidated view. This view can be made by selecting Parent Company (Consolidated) and then Subsidiary in the column selection.
That said, there are some configuration elements that need to be considered. We’ll discuss these next.
NetSuite Consolidated Exchange Rates
If your parent company has a different base currency to one or more of it’s child subsidiaries, you need to consider exchange rates. The system will automatically convert all accounts on the face of your statements using the Consolidated Exchange Rates. These can be found under Lists > Accounting > Consolidated Exchange Rates.
Unlike your transactional exchange rates there is only one rate used per period for NetSuite consolidation reporting. Consolidated exchange rates can be calculated or updated by the system during the period close process. The rates and calculations used are as follows –
|The currency exchange rate used on the last day of the period.
|Weighted average based on transaction amounts for the period for all accounts with a General Rate Type of Average. The transaction amounts are multiplied by the currency exchange rates on the dates of the transactions. The weighted average equals the total of the transaction amounts multiple by the currency exchange rates divided by the total transaction amount.*
|Weighted average based on transaction amounts for the period for all accounts with a General Rate Type of Historical. The transaction amounts are multiplied by the currency exchange rates on the dates of the transactions. The weighted average equals the total of the transaction amounts multiple by the currency exchange rates divided by the total transaction amount.*
Rates can also be updated manually by clicking Edit next to the relevant period on the Consolidated Exchange Rates page.
The Cumulative Translation Adjustment (CTA) Account
The Cumulative Translation Adjustment is a special type of account used in NetSuite OneWorld instances that consolidate their books. The CTA account is necessary to balance consolidated books where consolidated exchange rate types may differ across the balance sheet.
The CTA account is an automatically generated account in eligible environments. You cannot (and don’t want to) delete this account and it’s configuration is fairly limited.
Although the values posted are absolutely necessary to balance your consolidated books, the balance of the CTA account is not always the easiest to understand. Luckily, there is a specific report for reconciling this account that can be found at Reports > Financial > CTA Balance Audit.
Eliminating Intercompany Balances in NetSuite
What about intercompany trading?
If you are trading intercompany you don’t necessarily want to be showing a Cost and corresponding Income amount in your consolidated view. The need to eliminate those balances is going to be driven by other business decisions of course but it will affect your consolidated reporting.
If your system is set up correctly the eliminations can be run during your month end checklist processing. There is a step that will pick up eligible intercompany transactions and eliminate the balances to an Elimination subsidiary.
If you choose not to eliminate your intercompany trading, you need to bear this in mind when viewing your consolidated statements.