We recently completed a study of 91 CFOs of multi-entity companies and asked them about their accounting processes. Our goal here was to acquire well-grounded accounting statistics. In addition to uncovering some interesting insights and statistics into the current state of accounting, we also discovered several key opportunities that forward-thinking multi-entities can leverage.
Most companies (at least those with multiple entities) have realized that cloud accounting software is significantly more efficient than traditional accounting solutions. In addition, cloud accounting software is much easier to set up and doesn’t require any maintenance.
On the other hand, SMB accounting solutions require multi-entity companies to create separate accounts for each entity. Unfortunately, this means the parent company never has an up-to-date, consolidated general ledger as the entities are only consolidated at the end of the month.
This makes it nearly impossible to accurately gauge the company’s overall performance until the month is closed.
In addition, multi-entities that are using SMB accounting software have to either:
As you can see, both processes are time-consuming (which slows down the close financial process) and expose the data to manual error.
So a major opportunity for these companies is to move to a solution (like SoftLedger) that offers real-time data and automatically updates the consolidated general ledger the instant an accountant makes an entry for an individual entity.
This way, they will be able to close the month faster and always offer executives accurate data in minutes.
Approximately 30.77% of companies spend over $2,000 and up to $5,000 per month on accounting software, and an additional 38.46% of companies spend over $5,000 per month.
About 47.17% of companies using SMB accounting software spend over $5,000 per month on accounting software based on our statistics. However, only 29.62% of companies using ERP systems spend over $5,000 per month on accounting software.
This suggests that because multi-entity companies using SMB accounting software have to pay for a new account for each entity, it quickly becomes very expensive and inefficient.
Companies using SMB accounting software take longer to set up their accounting systems than companies using ERP systems. About 49% of companies using SMB accounting software completed the setup process in two weeks or less, whereas about 56% of companies using ERP systems completed the setup process in two weeks or less.
45% of CFOs said that the most important thing they look for in accounting software is automatic multi-entity consolidation.
An additional 32% of CFOs say that real-time data is the most important thing they look for in accounting software.
As multi-entities must finish the consolidation process before they close out the month, their financial close process is also delayed. This means that most companies don’t have access to a real-time, consolidated general ledger throughout the month.
The 44% of companies that require at least a week to consolidate entities are at a disadvantage as executives won’t be able to make decisions based on accurate data.
Here’s the full breakdown of the average time required to consolidate multiple entities:
As you can see, it’s most likely that a company will overspend in one or two months during the year.
In addition, about 23% of companies overspend at least five months out of the year.
Without real-time data, it’s difficult to make informed decisions throughout the month. Fortunately, companies can solve this by using a solution (like SoftLedger) that provides real-time data.
When asked, open-endedly, what their biggest pain point with their current accounting software is, about 33% said it is either difficult to use or they frequently experience technical difficulties.
Accountants have fully embraced automated accounting solutions, though many of these solutions are still cumbersome and inefficient.
In the coming years, we’ll likely see more and more software evolve to meet the needs of modern accounting teams.
At SoftLedger, we’re proud to be at the forefront of this revolution by offering a flexible accounting platform with real-time data and automatic consolidation in an easy-to-use package. If you’d like to learn more about SoftLedger, schedule a demo today.