Consolidated Reporting: 3 steps to get rid of your biggest Xero headache

Have you been searching for the best way to use Xero to run consolidated reports across your multi-entity business? Well, look no further. In this article, we discuss how to level up your reporting and business intelligence game with easy-to-use consolidated reporting tools and Xero.

Meet the experts:

• Harriet Hope, VP of Finance at Arbolus
• Harry Symons, Head of Customer Success at Joiin
• Ryan Pearcy, Associate Partner at Scrutton Bland

"Oh great, another spreadsheet": The data aggregation headache

Imagine your business as a complex puzzle. Each subsidiary is a piece, and without proper consolidation, you're left staring at a jumble of fragments, unable to see the big picture.

Financial consolidation is the master key to a unified financial view. By merging the financial statements of multiple entities within your group into a single, consolidated statement, you gain a comprehensive perspective on your business's financial health.

So, how can finance teams transition to multi-entity consolidated reporting?

Consolidated reporting with Xero

You may be wondering if you can do your consolidated reporting through Xero's software itself – unfortunately not.

Whilst Xero does offer a range of useful features that can be leveraged for consolidation, such as multi-currency handling and using find and recode for data cleansing, it doesn’t currently have any native consolidation features.

You’ll need to select ‘Accounting’ and ‘Reports’ to export the reports you need—such as profit and loss, balance sheet, and cash flow—and then repeat this process separately for each of your entities. This is both time-consuming and error-prone to say the least.

But fear not. There are a growing number of best-of-breed apps in the Xero ecosystem that specialise in consolidated reporting.

Often they are easy to use (and even easier to set up) so you can quickly consolidate multiple entities to create group reports, including intercompany eliminations, multi-currency options and customisable reporting features.

“I think the best thing about Xero is the app store, the flexibility and the choice it enables. Xero is the starting point, it's the building out beyond that that really gives you the power.” - Harriet Hope, VP of Finance at Arbolus

Turning data silos into golden insights

Consolidated reporting apps work by pulling through the relevant statements from each of your Xero files and then automating calculations and journal preparations to produce financial reports and business KPIs.

From forecasts, budgets, KPIs, and reports, these apps give you a unified dashboard where each entity converges into a single, powerful narrative.

So, if you want to maximise efficiency, profitability, and strategic agility, consolidated reporting software is a no-brainer.

“Other than for single entity management accounts reviewing or statutory reporting, we rarely look at our entities separately. On a day-to-day and month-to-month basis, we are interested in the consolidated group. Whether it's forecasting and budgeting KPIs, management accounts, or board reporting – all of that's done at a consolidated level. It's extremely important that that is easy to achieve and that we can have accurate and great consolidated reporting and information.” - Harriet Hope, VP of Finance at Arbolus

By tracking performance at the group level, rather than just by each individual entity, stakeholders (such as investors, creditors, and regulatory bodies) can make more informed decisions. Otherwise, you run the risk of operating in silos, with a fragmented view of finances, leading to suboptimal resource allocation, inaccurate forecasting and missed opportunities for cost savings.

HOT TIP🌶️: Whether you use a consolidation app or not, Mayday can help you tidy up your intercompany data so that the process of producing consolidated reports is significantly less time-consuming.

Step 1: Software selection 🖥️

Switching to an advanced consolidation solution can be a game-changer. However, not all software will work for your organisation.

Start the software selection process by identifying specific reporting needs, KPIs, and desired outputs to assess the capabilities of your chosen software against.

Not only will this help you to obtain buy-in and input from key stakeholders, it will ensure alignment with business needs and requirements.

For example, if you’re a CFO or an in-house finance team your main priority may be finding an easy, clear way to present data to your stakeholders. A Xero integration like Joiin would be a great fit to solve this problem by empowering you to effortlessly deliver key financial and KPI reports, or build your own report packs by combining off-the-shelf elements, custom layouts and bespoke charts.

Here’s how Joiin’s consolidated reporting software can help groups scale with Xero:

1. Custom reporting: Users can generate custom reports tailored to their specific needs, whether it’s detailed profit and loss statements, balance sheets, or cash flow reports.
2. Multi-currency reporting: One of Joiin’s standout features is its support for multi-currency reporting. In an era of global business, the ability to handle multiple currencies with automatic conversions is indispensable.
3. Intercompany management: Joiin’s intercompany management tools streamline intercompany eliminations, ensuring that financial statements are accurate and comprehensive.
4. Budgeting and forecasting: Budgeting and forecasting are seamlessly integrated into the platform, allowing businesses to compare actuals against projections and make informed financial decisions.

The result? More focus time for analysing and acting on the consolidated data rather than just processing it, all whilst ensuring data integrity across multiple entities.

Step 2: Set Xero up for success ✅

Implementing a consolidation solution can be a significant investment. So, if you want your reporting to be accurate and insightful, don’t skip through setup!

Whilst Xero has been designed for single-entity businesses, there are a number of things you can do inside the system to make it easier when you come to consolidate your entities.

Ryan Percy, Associate Partner at Scrutton Bland, advises:

1. Align and standardise the chart of accounts across all entities - you can do this in Xero HQ
2. Define and enforce the consistent use of tracking categories, codes and descriptors to enable granular data extraction and analysis
3. Make deliberate structural decisions, such as establishing shared coding conventions and reporting hierarchies, to streamline the consolidation process

“Depending on how you want to splice and report on data, it might mean that it's better to go down the tracking category route, or it might be better to keep it all in one nominal structure. You really need to think about the final point.”

By investing time and attention to detail during this setup phase, you can lay a robust foundation for seamless consolidation and reliable reporting.

“Aligning the chart of accounts and making that standardised is critical. It's so much easier when you export (if you have to go down that route) or overlay a reporting tool, to design your reports and identify any anomalies between the different entities. And it's the same with certain control accounts – anywhere you might be doing intercompany transactions, segregating those out. It makes it a lot easier to identify those transactions whenever you need to adjust for them, which is always part of that consolidation process.”

By ensuring you have a well-designed Xero environment, you can minimise reconciliation challenges, reduce the risk of errors and unlock the full potential of consolidated insights.

Step 3: Tailor and test 🔄

A one-size-fits-all approach to reporting consolidation is rarely effective. Every organisation has its own complexities, needs and data visualisation preferences, shaped by factors such as business structure, industry dynamics, and strategic goals.

So whilst it’s pretty easy to get set up on your first consolidation app, your consolidated reporting software is useless unless it works properly for your organisation. So tailoring and testing your software is key!

Not only will this help you maximise ROI, it’ll also help you to swerve costly implementation failures, data inaccuracies, and the need for subsequent system replacements.

“Don't be scared of changing things. It’s a big mistake to stick to the first iteration or the first way of doing things just because you're worried that it might take a bit of effort to change what's there.” – Harriet Hope, VP of Finance at Arbolus

Here are 3 ways to map your consolidated reporting needs:

1. Mapping out your organisation's business structure, including the number of entities, geographical spread, and inter-entity relationships, to ensure comprehensive data consolidation.
2. Identifying specific reporting needs, KPIs, and data visualisation preferences to deliver insightful, actionable consolidated reports that resonate with decision-makers.
3. Customising the solution's configuration, integrations, and workflows to harmonise with existing systems, processes, and unique consolidation complexities.

Make sure you thoroughly test and evaluate shortlisted tools against these benchmarks, using real-world data and scenarios representative of your organisation. Assess factors such as user experience, integration capabilities, scalability, and vendor support.

And then you are good to go! Consolidated reporting software is a game-changer for multi-entity businesses using Xero. No more siloed, entity-level data – just a powerful, unified lens into operations.

For more information, download the Xero for Groups Guide for FREE!

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