Company consolidation processes are a frequent challenge that we face with Microsoft Dynamics 365 Finance and Operations implementations. Some companies have different subsidiary companies in Latin America, for this reason we need to create not only separate entities, but also separate charts of accounts (COA).
In this article I will focus on the Online Company Consolidation capability in Microsoft Dynamics 365 Finance and Operations and how to efficiently implement it.
1. Create a consolidation entity
To create a company consolidation entity in Microsoft Dynamics 365 Finance and Operations, we must access in Organization administration > Organizations > Legal entities.
Then click on New and mark the company as:
– Use for financial consolidation process.
– Use for financial elimination process (Use this if your company manages intercompany transactions).
Add the entity into organization hierarchy.
Since this is a legal entity, there are some configurations that we need to do:
Generate number sequences
Go to Organization administration > Number sequences > Number sequences.
Then, click on Generate and follow the wizard.
General ledger parameters
To configurate this parameter click on General ledger > Ledger Setup > General ledger parameters.
Then, click on Batch transfer rules and change transfer mode to Synchronous.
This option allows to immediately transfer source document subledger journal entries to the general journal.
Click on the consolidation and elimination entity to configure ledger parameters. For this purpose, select General ledger > Ledger Setup > Ledger.
Remember to take into consideration the COA we want to report in before setting up the ledger for the consolidation entity. Also, Microsoft Dynamics 365 Finance and Operations will create all reports by default with the accounting currency we set up here.
Go to the consolidation entity and create a number sequence for elimination journals at Organization administration > Number sequences > Number sequences.
Use an elimination journal if the company manages intercompany transactions. This journal will remove the additional entries that were created when posting intercompany transactions.
To start the configuration, we go to General Ledger > Journal Setup > Journal Names and click on New.
Accounts for automatic transactions
To configurate this parameter, we click on General Ledger > Posting Setup >Accounts for automatic transactions. As soon as we have selected this option, we need to configure accounts for transaction types.
Part of the company consolidation process is to map consolidation accounts to their corresponding statutory account. In this case, I am consolidating with a legal entity, so we need to consolidate from our local accounts to our global accounts.
Select each company we want to consolidate and enter the consolidation account, or our global account.
For this, go to: General Ledger > Chart of accounts > Accounts > Main accounts. Select every account and map to the global COA.
• Global COA:
• Local COA:
At this point, we will have completed our setup of the consolidation legal entity and we are now ready to consolidate our balances.
2. Consolidate in Dynamics 365 Finance and Operations
Access to the consolidation module in Dynamics 365 Finance and Operations.
First, click on Consolidations > Consolidate Online.
Go to the core options to create our consolidations. Be very careful when selecting every option to get accurate results.
- Main account: select the accounts that should be included in the consolidation. If we don’t select an account range, Microsoft Dynamics 365 Finance and Operations will show us all charts of accounts.
- Use consolidation account: if we set this option to Yes, the selected consolidation account from field becomes available. Select whether all accounts should be merged to the consolidation account that is set on the Main accounts page, or whether we want to select the account from one of the consolidation account groups.
- Consolidation period: select the range of dates for the consolidation.
- Mark the gap for Include actual amount and Rebuild balances during consolidation process.
Select the legal entities that should be consolidated.
On the Currency translation tab, we define the legal entity, account and exchange rate type, and rate. Then, three options are available in the Apply exchange rate from field:
- Consolidation date:Use the consolidation date to get the exchange rate. This rate is equivalent to the spot or month-end rate. We will see a preview of the rate, but we can’t edit it.
- Transaction date: in this scenario, use the date of each transaction to select an exchange rate. This option is most often used for fixed assets and is often referred to as a historical rate.
- User defined rate:after we select this option, we can enter the exchange rate. This option can be useful for average exchange rates or if we’re consolidating against a fixed exchange rate.
Then click on OK and the online company consolidation process will begin. It can take several minutes depending on the number of transactions and companies that we need to consolidate.
3. Check your Company Consolidation Transactions
There are several ways in which we can view the results of our consolidation process. So, let’s take a look at a few of them:
Go to General ledger > Common > Trial balance
Also, we will visualize a consolidated trial balance for the periods on which consolidations were performed.
Click on Consolidations > Consolidation transactions.
Here, we will be able to get all entities for which consolidations were performed, as well as all the transactions that were brought over for the consolidated period.
If you follow the steps mentioned above and have a clear vision of what your company requires, I have no doubt that you’ll be able to perform consolidations and create reports without any major issues.
Microsoft Dynamics 365 Finance and Operations has many powerful capabilities for your company to enhance your business processes and operations.