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    Finance

    Consolidation and intercompany for a group of companies

    Once you own more than one company, you want to see the figures as a whole. That is consolidation. This page explains how an SME group approaches it, what intercompany involves and what Uniconta is confirmed to offer.

    How it works

    How consolidation and intercompany work in an SME group

    Many owners end up with several companies over time. A holding with an operating company, a trading business with a separate entity for the property, or two branches in different countries. Each keeps its own books, yet the owner, the bank and the accountant all want the picture of the group.

    Consolidation means combining the figures of those companies into one view of the group. That only works if the ledger accounts of the companies can be compared. If one company books a cost to a different account than the other, you have to line them up first. Companies that report in different currencies also have to convert to a single group currency.

    Intercompany means that companies in the group trade with each other. One entity invoices another for services, supplies goods or lends money. When you consolidate, you remove those internal items, because a sale from one group company to another is not revenue for the group. This is called elimination, and it requires both sides of the entry to match.

    In practice it starts with agreements, not software. Which accounts mean the same thing in every company? In which currency does the group report? Who books the internal invoice, and when? If you answer those questions beforehand, you end the year with an overview that is right first time. If you skip them, you find the differences only when the accountant asks.

    A fiscal unity is a different thing. It is a Dutch tax concept under which companies that meet certain conditions are treated as a single taxpayer for, say, VAT or corporate income tax. It is applied for with the tax authority and it changes how you invoice and file returns. Whether it suits your group is a question for your accountant or a tax specialist. Consolidated annual accounts are yet another matter, namely a statutory document that your accountant prepares.

    What often goes wrong

    What usually goes wrong

    These are the patterns we see in SME groups that keep each company's books separately.

    • Different charts of accounts per company

      Each company has picked up its own accounts over the years. Combining them becomes a spreadsheet job that starts again from scratch every year.

    • Internal balances do not agree

      One company books an invoice in March and the other in April. At group level a difference remains that nobody can explain.

    • Different currencies and rates

      Without an agreement on the group currency and the rate, this year's totals cannot be compared with last year's.

    • Data sits in separate systems

      For a group overview somebody has to merge exports from several packages. That takes time and goes wrong easily.

    • Internal transactions are poorly recorded

      Invoices, loans and recharges between companies are not properly booked, so the accountant and the tax authority ask questions later.

    In Uniconta

    What Uniconta is confirmed to do here

    Uniconta is cloud-based ERP and accounting software. For groups the following is confirmed. Consolidated reports are among the financial reports. For each ledger account you can record a consolidation account number, which is used to compare and combine companies in a single statement. The company settings include a group currency. The dashboard designer can join data from several companies, and documents can be moved between administrations. That lets you keep working per company while still looking at the whole.

    What we have not confirmed, we do not present as a feature. We do not describe automatic elimination of intercompany items or intercompany booking as a standard part of Uniconta, and we do not promise a fiscal unity or consolidated annual accounts as an output. Trading between group companies exists in the Uniconta ecosystem only as a partner add-on and is not part of the standard.

    In practice that means the eliminations and the group annual accounts stay with your accountant or bookkeeper. On the Uniconta side we make sure that the charts of accounts and consolidation account numbers are set up so that the company reports line up, which keeps the trial balance and the journal entries of the companies comparable.

    Our package

    Part of the Uniconta ERP standard package

    We set up proven software to a fixed standard. We do not develop custom work in Uniconta, which is why we can give a fixed price. Setting up several companies belongs to the standard Uniconta ERP package, with a fixed scope and a fixed price, given without an amount. What exactly is in the scope, for example how many companies and which reports, is agreed beforehand, and the scope is fixed before we start.

    If one of the companies has a warehouse, we combine Uniconta with BizBloqs. For the invoices that pass between group companies it also helps to know how accounts receivable management is set up. If a company in the group trades across borders, the EC sales list and intra-community supplies come into play as well.

    Read on

    More about Uniconta

    Terms for this topic

    EC Sales List (ICP return)Intra-community supplyReverse-charge VATJournal entryTrial balance

    Have your group structure mapped up front

    Tell us how many companies you have and what you want to see for the group. We then record beforehand what fits the standard package.