Several businesses, one truth: how to see it

Hook

When a business gets bigger the shape is usually this: two companies, three branches, and possibly a warehouse overseas. Then the boss asks the question: "the whole group — how much does it actually earn?" Stack the reports and add them up? No. Today: group reporting and branch accounts — several businesses, and how to see one truth.

Branch accounts: separate kitchens inside one company

Take the simpler layer first: the branch. A branch is not a separate company — the books are still one set, but they are kept by kitchen. The ERP dimensions idea from the fourth lesson: every item of income and expense carries one more tag saying which branch. Do it properly and you can see each branch's own result — which one is busy and which is losing. Internal transfers — moving stock from the main store to a branch is not a sale, it is a house move, and the books must keep that clear. And head office costs — the boss's salary and the head office rent, allocated down by the rules from the tenth lesson, so that each branch's real performance is judged fairly. A chain with no branch accounts is one big pot: the profitable outlet is feeding the loss-making one and you think everybody is fine.

Group reporting: not addition, consolidation

The next layer: several companies — and here what you need is consolidation. Why can they not simply be added? Because a group does business with itself: company A sells goods to company B, the holding company lends to the subsidiary, and receivables and payables run between them. Add them straight together and those internal transactions inflate the figures — turnover is overstated, and money you owe yourself counts as a liability. The work of consolidation is eliminating all of that: intercompany sales and purchases, intercompany balances, and internal profit on goods not yet sold outside the group. What is left is the group's real business with the outside world. The bank looks at the group, investors look at the group, and the number you should be looking at is the same one.

The three consistencies: what makes the figures stackable

Now the most important part of this lesson — what consolidation depends on: consistency, in three parts. One, consistent classification — the whole group on one chart of accounts (the fourth lesson). Company A calls it "transport", company B calls it "logistics" and branch C pushes it into "miscellaneous" — not even a saint could consolidate that. Two, a consistent basis of preparation — everyone on the accrual basis, with the same year-end date. Different year ends have to be aligned before they can be combined. Three, consistent group accounting policies — the same class of asset on the same depreciation method, stock on the same valuation method (the ninth lesson), and estimates on the same ruler (the three parts from the fortieth lesson). Company A depreciating over five years and company B over ten gives the same machine two costs — do the numbers still mean anything? Across borders, add two more: currencies translated by the rules, and differences between national standards adjusted onto the group's basis. In one line: standardise the measures first, then unify the accounts.

Who assures it: MIS and three layers

With the figures consolidated, how do you know they are credible? Day to day, through MIS — the management information system: not the statutory annual report but the dashboard management reads monthly, by branch, by product, by project (the ninth and tenth lessons), the whole group on one screen. Assurance comes in three layers. Statutory audit — outward-facing, examining the annual statements (the thirty-second lesson). Internal audit — inward-facing, examining processes and controls: how payments are approved, how goods are controlled, how authority is divided. Our founder did internal audit in listed companies (the seventh lesson), and that discipline transfers directly to a small group. And LTT's provenance approach — provenance, meaning origin: any figure on the group report can be traced all the way back — consolidated figure, to each company's statements, to the schedule (the fortieth lesson), to the entry, to the transaction set evidence pack (the thirty-first lesson). Figures with a provenance are what give a report its confidence.

To close

In summary: branches on their own kitchens, groups eliminated properly, the three consistencies, and figures with a provenance. The seventh lesson said group consolidation and branch reporting are exactly LTT's strength — for bosses with several companies and several branches, this is not a headache you have to carry yourself. Want to see what your group's one truth looks like? Grab a coffee first and talk about your business. For the accounting, come to LTT. I am LTT, helping SME bosses get their accounts straight. Follow us, and see you next time.