| Background | A private equity-backed SaaS company headquartered in the United States, with operations in Germany, Switzerland, Slovakia, and the United Kingdom, had recently acquired four companies, adding 15 subsidiaries across four countries and operating in three different currencies. Despite having NetSuite as its ERP, the company was not utilizing the system for financial consolidation and instead relied on Excel for manual consolidation, producing only a consolidated income statement. With an audit approaching in a few months, the company needed to deliver GAAP-compliant consolidated financial statements, including the balance sheet and cash flow statement. Additionally, the previous year’s audit management letter cited a material weakness for performing consolidations outside of the ERP. |
| Challenge | The company was unprepared for the audit, and its Excel-based foreign currency translations did not comply with GAAP consolidation rules. Without a proper system-driven consolidation, financial reporting was prone to errors, inefficiencies, and compliance risks. |
| Analysis & Key Findings | To address the issue, we conducted a systematic review of the company’s prior-year audit papers and consolidation methodology to identify gaps and determine the best course of action. Step 1: Understanding the Prior Consolidation Approach • The auditors had translated each foreign entity’s ending trial balance manually before consolidating. • We leveraged these audited trial balances as a baseline, ensuring that any system-driven consolidation would tie back to the prior year’s audit report. Step 2: Implementing System-Driven Consolidation in NetSuite • We imported all 15 subsidiaries’ trial balances into NetSuite in their respective local currencies, starting with the prior-year audit period (12/31/XX). • After completing the initial consolidation, we confirmed that the system-generated balances aligned with the prior year’s audited financials, ensuring accuracy and a clean starting point. Step 3: Monthly Data Imports & FX Translation Automation • Each month’s trial balances were imported into NetSuite, with automated foreign currency translation applied using system-generated rates: • Period-end rate (for balance sheet items) • Average rate (for P&L items, based on published daily exchange rates from a trusted financial institution) • Historical rate (for equity transactions) • The only manual adjustment involved modifying the average rate, ensuring accuracy based on daily published FX rates. Step 4: Intercompany Reconciliations & CTA Adjustments • A critical challenge was ensuring that all intercompany transactions were properly eliminated to prevent misstatements. • The accounting team conducted a comprehensive review of intercompany accounts, reconciling balances and posting eliminating journal entries. • The Cumulative Translation Adjustment (CTA) account was reviewed to ensure proper reflection of currency fluctuations and prevent erroneous swings caused by incomplete eliminations. |
| Solution & Outcome | ✅ SOLUTION: • All ending trial balances were successfully imported into NetSuite, allowing the system to perform currency translation and consolidation automatically. • The FX rates used for translation were provided by auditors, ensuring that the consolidated financial statements in USD matched the audited reports. • The intercompany accounts were fully reconciled and eliminated, preventing discrepancies in the CTA account and ensuring financial accuracy. 📈 OUTCOME: • The company met its audit deadline with fully consolidated GAAP-compliant financial statements. • The material weakness cited in the prior year’s audit for consolidating in Excel was removed in the current year’s audit management letter. • Automating consolidation, FX translation, and intercompany eliminations in NetSuite significantly improved reporting accuracy, efficiency, and compliance and had the benefit of decreasing days in the closing process. |
| Conclusion | By transitioning from Excel-based consolidation to a fully integrated NetSuite solution, the company eliminated manual inefficiencies, reduced financial reporting risks, improved the closing process and improved audit readiness. This case study highlights how leveraging ERP capabilities can drive operational efficiency, financial accuracy, and compliance in multinational organizations. |
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