Multi-entity accounting: what to check before adding a new entity
What changes when you add a second entity?
With one company, your books cover everything the business does. With a second one, a new kind of work appears: everything the two companies do with each other has to be matched in both sets of books and then removed from the group figures.
Take a German parent company with a subsidiary in Spain: one head of finance told us that in their setup, the Spanish books are kept by an external tax advisor in Spain, and the bookings arrive once a month as an Excel file. Suppose the parent invoices the Spanish entity 100,000 euros for management services, which is revenue in one set of books and a cost in the other. At month-end, the parent's finance team opens the Excel file next to their own ledger, looks for the matching entries, and finds that the Spanish entity shows the invoice as paid on 30 September, while the money only reaches the parent's account on 2 October. For September, the two sets of books disagree by 100,000 euros, and the difference has to be explained as cash in transit. Then the invoice has to be eliminated from the group figures, both the revenue on one side and the cost on the other, because at group level the company has sold something to itself.
How does a second entity change your month-end close?
With two sets of books in two systems, your close becomes two closes plus a consolidation. You can only put the group figures together once both entities are finished, so the entity that closes last decides when the group numbers are ready. Your German tax advisor works on the parent in DATEV and the Spanish advisor works on the subsidiary, so neither of them sees the group, and the consolidation falls to your own finance team. To consolidate, the subsidiary's chart of accounts has to be mapped to your SKR03 or SKR04 structure, and every intercompany entry has to be found on both sides before it can be eliminated. A subsidiary outside the euro area adds currency translation: its balance sheet is translated into euros at the closing rate and its income statement at an average rate. One finance team with an entity in Poland told us they need one fixed exchange rate per month to keep their monthly statements clean.
The work grows with every entity: one company told us their consolidation in DATEV was already hard to manage at two entities, with four to five more planned over the next eighteen months. Another company, whose parent invoiced its project companies by hand, finished its annual reports a year and a half late.
When does German law require consolidated accounts?
German commercial law (HGB) requires a parent company with controlling influence over a subsidiary to prepare consolidated accounts (Konzernabschluss) within five months of the end of the financial year (§ 290 HGB). Your group is exempt if, on two consecutive balance sheet dates, it stays below two of three thresholds (§ 293 HGB). You can measure them in one of two ways. On the consolidated figures, the thresholds are 25 million euros in total assets, 50 million euros in revenue and 250 employees; on the added-up figures of all group companies before eliminations, the euro amounts are 20 percent higher. The exemption does not apply if a company in the group has shares or bonds traded on a regulated market.
Many growing companies stay below these thresholds for several years. In practice, the consolidation work starts much earlier, because your board and your investors want one view of group revenue, cash and margin as soon as there are two entities.
What should you check before adding the next entity?
First, check whether all your entities are kept in one system, each with its own books, or in separate systems whose figures have to be combined every month. Only the first gives you the group view by default, with each entity available as a filter.
Second, check whether the system links the two sides of an intercompany transaction automatically, or whether someone has to find and match them by hand at month-end.
Third, check what adding the next entity involves: it should be a configuration step in the system you already use, not a new system with its own bookkeeping that has to be combined with yours every month.
How does Agent F handle multiple entities?
Agent F is an AI-native ERP that keeps all your entities in one system, with separate books per entity, and shows the group as one view. It fits how your group actually works: you list your requirements, from your group structure to the workflows and automations each entity needs, and Agent F builds the ERP around them, which means that adding a new entity is just a configuration change rather than a new ERP implementation.
Your bank accounts, expense management tool, invoicing tool and payroll and HR tool are connected for every entity. Every transaction is reconciled as it comes in: Agent F suggests the matching invoice, the account and the cost centre, each with a confidence score, and your team reviews and approves it, so manual matching becomes an approval flow. Payments between group companies are handled the same way: the system knows which companies belong to the group and classifies their payments as intercompany, and the payment reference and invoice details tie each payment to the right invoice. The intercompany revenue and cost are then eliminated in the group view, and at month-end you only review the items that do not match, such as a payment still in transit.
Because every entity is booked as it runs, the group figures are current at any point in the month, and the reports your board and investors ask for come from the same bookings with each tax advisor working on their own entity.
How long does it take to consolidate your group figures once the last entity has closed?
Learn how Agent F works, and book a demo at agent-f.ai/demo to see it run on your numbers.