Consolidation is a term used to merge parts of smaller companies into one larger one. The word ‘consolidate’ is derived from the Latin words com “together” and solidare “to make solid,” meaning to combine. Consolidating a business is one way to streamline its financial statements. Once the companies have merged, it is possible to see a single set of financial statements that includes all of the subsidiary companies under the parent company.
To begin the consolidation process, it is important to map data from subsidiaries to a central chart of accounts. These adjustments will record intercompany loans and corporate overhead. Adjusting entries need to be made at both the subsidiary and parent level. In addition, a CTA must be reasonable. Once the process has been completed, the financial statements will need to be audited. For smaller companies, this process is a relatively simple task, requiring no special expertise or tools.
Another advantage to consolidating your debts is that you can simplify repayment by only having one monthly bill. You can also get a longer repayment period, which will simplify your life. However, you should be careful when choosing this option because it can result in additional debt. If you have high interest rates on your unsecured debts, you may not be able to qualify for a consolidation loan. In this case, you should consider using a lower interest rate to pay off the remaining balance.
Another advantage to consolidating your businesses is the reduced amount of competition. The combined company can provide better customer service and reduce your costs. With this approach, you can also improve your company’s financial stability. One major downside is that you may end up with less profit after the merger. But as long as you’re careful, you’ll get more out of the combined company. It is worth the effort to figure out the pros and cons of each.
If you’re looking to save money while minimizing risk, consider using a cloud-based ERP solution like Mosaic. It can quickly generate charts to analyze any aspect of your business. Because it breaks down financial data into levels, it allows you to slice and dice it for a deep insight into your data. Similarly, spreadsheet-based consolidations are tedious and repetitive, but they’re not going to save you money. It might save you a few hours of manual work every month, but they’ll never replace the value of a business-building tool.
A key benefit to consolidating your companies is the fact that it helps you make them look more streamlined. Having one set of financial statements makes it easier to compare the financial health of several different businesses. Whether you’re dealing with a parent company that owns several subsidiaries, or a small group that is controlled by another, consolidated financial statements are essential for you to make informed decisions. In addition to making financial statements easier to read, consolidated financial statements are also more transparent.