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When Companies grow and become more Complex
By Enabliser Andrew
I often come across companies that have persevered with small business applications such as QuickBooks® for too long despite many changes the company has seen over the past years. As companies grow, ad hoc changes are often made to the corporate structure to allay some areas of concern, such as laying off risk or for taxation purposes. As these changes are implemented it is rare that any thought is given to how to best manage this with the small business financial management tools used in the business from start up. It is even rarer that it is identified that these tools, despite being touted that they can manage multiple companies, do not offer a solution for the replication and balancing of transactions that is at the core of the issue.
Generally it is left to the accounting team to manage the increased transaction load and more importantly the reconciliation of the intercompany loan accounts. These must be kept in balance to ensure that the underlying financials are correct both from the compliance and reporting perspective. All too often this is achieved using increasingly complex spreadsheets and taking a lot of their time (which could be better spent on providing thoughtful analysis of the company operations). This situation will leave management not understanding why the accounting team are becoming overwhelmed with transaction processing and cannot get accurate information to them within a reasonable time frame, let alone why they do not have time for greater value add activities.
As the company continues to grow this is often exacerbated by further complexity, such as when the entities start selling product between each other - and documents need to be created to reflect the purchase and sales transactions in each entity. Meaning the finance team now face a doubling of the work load for these transactions and even further work to ensure everything balances and they can produce accurate financial and operational reports. It is normally when this situation becomes unworkable that organisations start looking for solutions.
The issues stated above do not touch on reporting, which can also be extremely time consuming when you need to compile financial reports from more than one company database without the tools to properly consolidate as this is much more that adding together the numbers from each. Again the difference between simply allowing multiple databases and having the tools to properly manage them becomes very clear to those involved day to day.
Fortunately there is a solution with Sage 300 and the Orchid Inter Entity products - which come in several editions to match the differing needs of growing companies. At the core, features are provided in this solution that differentiate separate entities for transactions, even where customers and suppliers are shared between them. It ensures any transaction that crosses company boundaries is balanced, as vital loan account entries are generated automatically, ensuring the balance and integrity of the financials is maintained. Inter Entity will also manage the more complex issues associated with more complex corporate structures and resolve intercompany entries where the involved entities do not have a direct relationship and instead must pass entries through multiple companies before reaching the destination.
Orchid also offer an Inter Entity Trade module that will manage the buying and selling transactions between related companies with the creation of a purchase document in one entity automatically creating the sale document in the related entity. These products ensure that your finance team are working to provide thorough advice on the company finances and structure rather than merely processing the same transaction over and over – how much value would that add to your organisation?