Many organizations use Microsoft Dynamics 365 Business Central in several business units or companies. There are also cases of using Business Central in subsidiaries that must report to parent organizations. In both cases, accountants use the available tools that facilitate the consolidation of financial data.
Consolidation means combining financial statements of two or more units forming a capital group (subsidiaries). Functionally, it is actually a transfer of data (G / L entries) from business units to the consolidated company. In the Microsoft Dynamics 365 Business Central system, each company included in the consolidation is called a business / organizational unit. A company formed from economic entities for the sole purpose of consolidation (excluding joint transactions) is called a consolidated company. In order to be able to use the consolidation functionality, you must first define the consolidated company and its subsidiaries in the system.

Consolidation in Business Central is also possible when the financial statements of the business unit are in a currency other than those of the consolidated company. It is then necessary to set up exchange rates for consolidation.

As part of Business Central, the following can be consolidated:

• companies with different account plans,
• companies that use different tax years and different currencies,
• full amount or percentage of the company’s financial information
• different exchange rates on different G / L accounts.

The standard course of the consolidation process in Business Central is presented in the diagram:

Configuration of business units and a consolidated company

As mentioned before, consolidation requires the founding of a consolidated company with its own chart of accounts and dimensions. The chart of accounts is separate from the chart of accounts in other business units, and the chart of accounts in individual business units can be different. However, a consolidated company’s chart of accounts must have all accounts that are consolidated from business units. In the event that dimensions are also consolidated, the same principle applies here as in the case of G / G accounts – the consolidated company should have all dimensions consolidated from business units.

In order for the consolidation process to take place, a link must be established in the consolidated company with the companies included in the consolidation, which are organizational units. Each unit has predefined settings that vary depending on the specifications of that business unit, incl. local currency or the environment in which it is located.

Testing files and database before consolidation

The system offers two methods of consolidation, depending on where the data will be consolidated – from the database or from a file. In case the business unit is in a different database than the consolidated company, you need to export the consolidation data to a file. Depending on which method of consolidation is being processed, it is recommended to test the database or the file before consolidation.

As for the testing of this data itself, Business Central checks for differences between the basic information in the business units and the consolidated company, such as account numbers or dimension codes. You must fix any errors before running the consolidation.

Consolidation

The actual consolidation process is actually the transfer of data from business units to the consolidated company. As mentioned before, the transfer of this data can be performed in two ways: from the database and from a file. If consolidation is to present a complete picture of the group’s financial position, it must occur across all business units.

Elimination of recurring transactions

After all companies have been consolidated, it is necessary to enter elimination entries to delete transactions registered with more than one company or to delete entries for inter-company transactions. This is a manual process in which you must find and eliminate transactions that may need to be corrected. Business Central enables the verification of such eliminations to illustrate their impact on the trial balance of the consolidated company. The system provides a G / L Consolidation Eliminations report that displays a preliminary trial balance. It shows the consequences of eliminating entries by comparing entries in a consolidated company with eliminations that were entered in the main journal. The elimination calculation is a time-consuming manual process that can be assisted by setting up specific accounts between corporate, between corporate customers / vendors, and between corporate groups.

Consolidated Trial Balance

The result of the consolidation process is the generated complete report presenting the overall assessment of the financial condition of the group. This report is the Consolidated Sample Balance with each account appearing on a separate line according to the chart of accounts structure.

Reporting related to consolidation in Business Central can be extended using Business Intelligence tools such as Power BI.