Sometimes spreadsheets or QuickBooks are enough for company financials. But these small business solutions break down as a company grows. For a company conducting business in multiple geographies, there’s really only one choice: an enterprise resource planning solution (ERP).
Designed originally for manufacturing operations, ERP has evolved over the years into the system of record for fast-growing small businesses and virtually all mid-sized to large organizations.
This is because all but the smallest organizations need a single source of truth that houses all business data and can harmonize operations across the full scope of an organization. ERP is built for this task.
Until recently, only larger businesses could take advantage of ERP because of the cost and complexity involved. But cloud ERP has changed all that. Solutions such as SAP Cloud ERP can roll out small and fast for tiny organizations, then expand as the business grows.
The scalability and relatively easy implementation of SAP Cloud ERP is particularly beneficial for businesses that operate multiple subsidiaries or work with a range of currencies. This is because, unlike QuickBooks or spreadsheets, SAP Cloud ERP is designed for organizations operating across multiple legal entities, countries, and currencies. SAP Cloud ERP takes the nightmare of juggling currency conversions and multiple business entities and makes it simple.
Let’s take a look at how SAP Cloud ERP simplifies multi-company, multi-currency operating environments.
Businesses that work across multiple countries often organize around a parent company and country- or region-specific subsidiaries. The parent company might be based in the United States and manage financials in US Dollars, while its Asian subsidiary is located in Japan and works with Japanese Yen, and its European subsidiary is in London and works with British Pounds.
One approach for handling this arrangement is three sets of financial books and lots of manual processes for reconciliation and reporting. This is the hard way that no CFO wants.
The much better approach is using ERP and its native facility for handling multi-company, multi-currency scenarios.
SAP Cloud ERP uses a universal ledger for all businesses that can be broken down by company for country-specific financial reporting but combined for unified financial management and overall group visibility.
At the same time, transactions can be recorded in local currencies for local statutory bookkeeping, but automatically translate into the currency of the parent company for consolidated financial management.
The use of a universal ledger makes multi-entity financial management possible with SAP Cloud ERP. Instead of maintaining entirely separate tables for the general ledger, cost accounting, profitability analysis, and asset accounting, SAP Cloud ERP stores financial data in a single structure. This creates a single source of truth that enables real-time reporting and easier financial management.
Separate company codes are used for each entity within the group, with each legal entity having separate statutory books, separate tax requirements, separate fiscal calendars, separate default currencies, and independent financial statements. At the same time, however, all data still lives in a common database shared among the related entities.
With this use of a common database, SAP Cloud ERP can automate intercompany accounting for things such as intercompany sales, shared service charges, management fees, internal inventory transfers, and cross-company procurement.
SAP Cloud ERP can support a centralized chart of accounts for all companies within the group, too, with local account-mapping where required. This enables consistent reporting worldwide, assists with local statutory compliance, and leads to easier consolidation.
The SAP platform can manage group real-time consolidation using the same underlying financial data model as operational accounting, reducing close cycles. It can also convert subsidiary results into the group's reporting currency automatically, and eliminate intercompany receivables/payables, internal sales and purchases, internal profits in inventory, and intercompany financing balances.
SAP Cloud ERP takes the pain out of working with multiple currencies, too. Because multi-currency support is native to the platform, not an add-on like with QuickBooks, financial transactions can be stored in multiple currencies simultaneously for seamless accounting. A transaction recorded in an SAP Cloud ERP system can be stored in the company’s local currency, a consolidated group currency, a global currency, hard currency in the case of inflationary economies, and freely-defined currencies—all at the same time.
This currency-agnostic approach enables a subsidiary in Asia to invoice in Thai Baht, maintain its books in Japanese Yen, and report to the corporate parent in USD. All of this is recorded and reported in the relevant currency values without requiring separate financial ledgers or manual processes.
Automated exchange rate management makes this possible. SAP Cloud ERP maintains exchange rates centrally, and it can import rates from external providers, apply daily, monthly, or custom rates, and track exchange rate differences automatically. It also allows for spot, average, and historical rates.
At the end of a financial period, SAP Cloud ERP can also automatically revalue open receivables and payables, revalue foreign-currency bank accounts, post unrealized gains and losses, and generate audit-ready journal entries.
This is done using International Financial Reporting Standards and Financial Accounting Standards Board standards for proper financial compliance, of course.
If your business is global, use the right tools for operations and financial management. Once you see SAP Cloud ERP in action, you won’t tolerate anything else for cross-border financial management.
See SAP Cloud ERP for yourself by scheduling a demo, or contact one of our experienced ERP consultants at (801) 642-0123 or by writing us at info@nbs-us.com for answers to your specific questions. We love talking shop, especially when it comes to streamlining business processes.