What is multi-entity accounting?

In today's competitive business landscape, expanding into new markets is a valuable way of driving growth. But, as businesses set their sights on international expansion, they need solutions that can effortlessly handle multiple different financial accounts, structures, and jurisdictions.

Enter multi-entity accounting – an essential financial approach for businesses with multiple entities across different locations. If your business is ready to expand, particularly on a global scale, effective multi-entity accounting is the key.

Read on to find out how it can help optimise budgets, ensure compliance with diverse regulations, and empower your business to effortlessly navigate the intricacies of international growth.

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In this article:
What is multi-entity accounting? What is multi-entity consolidation? What are the best multi-entity accounting providers? Using Wise to manage cross-border payments

What is multi-entity accounting?

Multi-entity accounting refers to the management of financial data across various entities, offices, and subsidiaries within a business.

As companies expand globally, they often establish separate entities to comply with different regulations, cater to diverse markets, and adapt to local business practices. Smaller businesses with multiple offices, outlets or product lines in different countries may also fall under the umbrella of multi-entity businesses.

Of course, the more entities that fall under a single company's umbrella, the more challenging and complex managing the financial side becomes. Each entity will have its own bank accounts and distinct accounting processes, with international branches often operating with their own regulations, laws and cultural nuances.

The risk of errors and inconsistencies increases as operations become siloed, hindering the seamless flow of financial information.

Despite these challenges, the opportunities presented by multi-entity businesses are substantial, and multi-entity accounting provides the ability to manage growth on a global scale effectively.

What is multi-entity consolidation?

While there will always be a need for accounting on a local or regional level, a parent company will also need a centralised view of financial data from various entities, offices and subsidiaries.

Whether for optimising resource allocation, identifying growth opportunities or ensuring regulatory compliance, multi-entity consolidation is key for informed decision-making, ultimately contributing to long-term business success and resilience.

Managing multiple currencies across entities

Expanding into new markets often means managing multiple currencies across those regions, introducing complexities in treasury management. Multiple bank accounts in different countries can be a financial headache, with each country requiring different regulatory considerations, fees and reporting requirements.

Traditional banking approaches may incur high costs associated with managing multiple bank accounts in various countries, particularly if you need to hold and manage different currencies in one account or make use of a costly correspondent banking network to move money from one entity to another.

Additionally, exchange rate volatility poses a constant risk to a company's financial position. Sudden fluctuations can lead to unexpected losses or gains, creating uncertainty for your business and complicating financial reporting. Multi-entity accounting enables parent companies to manage and hedge against FX risk to ensure optimal cashflow.

What are the best multi-entity accounting providers?

To manage this complexity, many businesses turn to advanced multi-entity accounting software that can offer a single view of their financial health. These platforms make it easier to navigate the intricacies of multi-entity accounting, ensuring compliance, minimising errors, and allowing leadership to take an informed view of the company’s position. Here are three of the most popular:

Sage: Sage offers multi-entity functionality to help businesses efficiently handle financial operations across various subsidiaries or locations. It provides features for budgeting, reporting, and compliance, delivering visibility of real-time reporting and analytics for medium to large businesses and global enterprises.

Fathom: Fathom specialises in financial analysis and reporting, and its financial consolidation software allows businesses with multiple entities to analyse financial data in a unified platform. It provides insights into performance metrics, making it easier to make informed decisions.

Translucent: As a multi-entity accounting solution that connects to existing solutions, Translucent focuses on transparency and ease of use. It offers a suite of applications for multi-entity businesses and aims to simplify the complex financial processes they face.

Using Wise to manage cross-border payments

Wise offers a valuable solution for companies looking to expand into new markets and manage multi-entity operations - especially if the company has multi-currency needs. The Wise Business account provides a multi-currency account that can hold, convert, and send in 40+ currencies and receive funds like a local in 8+ currencies, without the need to open new bank accounts in each region, streamlining your business’s financial operations.

It makes it easier for your business to control FX costs through transactions using the mid-market exchange rate with low costs and transparent fees - something that’s particularly important when traditional banks often hide costly markups within their exchange rates. The account also supports seamless currency conversion, allowing you to pay invoices, suppliers, and team members in more than 40 currencies. This flexibility is crucial for adapting to diverse market environments and managing cross-border financial transactions in the most efficient and cost-effective way.

In addition, payout times are fast and efficient, with more than 60% of payments arriving in less than 20 seconds in Q3 2023. This speed of transfer is a crucial element in fostering strong relationships with suppliers, contractors, and employees, no matter where they are in the world. As well as streamlining internal operational efficiency, fast payouts are essential for successful business relationships. Wise's batch payments feature allows you to pay up to 1000 payments in multiple currencies in a single transaction, which can streamline payroll or bulk invoice payments.

(*The speed of transaction claim depends on funds availability, approval by Wise's proprietary verification system and systems availability of our partners' banking system, and may not be available for all transactions)

Additionally, you can empower your employees to spend from your account in 40+ currencies with the Wise expenses debit card, with individual and role-specific limits and real time notifications.

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Expanding a business into new markets and setting up an overseas entity is undoubtedly challenging, but with the right tools to support the move, it can be immensely rewarding. Smart multi-entity accounting plays a pivotal role in managing the challenges that come with international growth, saving your business time, money and headaches. It delivers a centralised view of your business’s financial health, supporting strategic decision-making and operational efficiency.

And, as businesses scale and grow into multi-entity operations,securing competitive FX rates is key to keeping conversion costs as low as possible and streamlining financial transactions. Making fast payments to your suppliers, partners, contractors, and employees is another essential consideration.

In a global economy where expansion is often key to success, understanding multi-entity accounting is a necessity. By combining specialised software with an intuitive and effective multi-currency account like the Wise Business Account, your business will be able to more easily scale and grow.