How do you consolidate financial statements for multiple entities?
Load each entity's trial balance, map every account to one group chart of accounts, translate foreign entities into the reporting currency, eliminate intercompany balances and transactions, then add the entities up. The adding up is the easy part. The hard part is doing the mapping and the eliminations exactly the same way every month.
In a spreadsheet close, each of those steps depends on someone remembering how they did it last month. That's what makes the close fragile, not the arithmetic.
How do intercompany eliminations work at month-end?
When one entity sells to, lends to or charges another, both record it. At group level those amounts cancel out: intercompany revenue against intercompany cost, receivables against payables, loans against loans. Eliminations remove them so the consolidated statements only show business with the outside world. Mismatches between the two sides are where closes stall.
The fix is less about the elimination entries and more about matching: both sides recorded in the same period, at the same amount, in accounts the model recognizes as intercompany.
How do you handle currency translation for foreign subsidiaries?
Under the usual current-rate method, assets and liabilities translate at the closing rate, income and expenses at the rate for the period (an average is common), and equity at historical rates. The difference goes to a translation reserve in equity. In a spreadsheet close, the risk is rates typed in by hand, differently for each entity.
Can you run consolidation in Excel, and when does it stop working?
Yes, and plenty of groups do for years. It stops working when the file outgrows the person who maintains it: more entities, a second currency, or an acquisition on a different chart of accounts. The warning signs are a close that waits on one person and eliminations nobody else can explain without asking them.
Should consolidation happen in the ERP or in a separate model?
If every entity runs on one ERP instance with one chart of accounts, the ERP can often consolidate well. Groups with several ERPs, acquired entities still on their own systems, or planning and board reporting that need the same consolidated numbers usually do better with a separate model that pulls actuals from every source.
