You don‘t always have to act economically, but you do have to know the effects of your actions. Transparency is the key to a clear view of your company’s net assets, financial position and results of operations. Transparency shows the opportunities and risks in your company.
Do you have a majority shareholding in other companies? Are there economic interdependencies between parent companies and subsidiaries? Then your group of companies has reached a level of complexity where it is worth considering consolidated financial statements for the group of companies. Viewing all the companies in the group as one company (consolidation) shows the economic situation at a glance. This makes it easier to control the group of companies. In many cases, banks or investors demand more comprehensive reporting in the form of consolidated financial statements when the group of companies reaches a certain level of complexity, since individual observations are time-consuming and can lead to incorrect assessments without detailed information. And if a group of companies reaches a certain size, § 290 ff. of the German Commercial Code (HGB) applies. German Commercial Code (HGB), the obligation to prepare consolidated financial statements applies.
When consolidating the annual financial statements of the individual companies, the regulations and principles of the HGB apply. During consolidation, the group of companies is presented as one company in accordance with the principle of unity. For this purpose, the relationships between each other, e.g. between parent company and subsidiary, are eliminated. This means that the corresponding assets, liabilities, expenses and income are no longer included in the consolidation balance sheet and income statement.
Consolidation is at the heart of group accounting. In a complex process that ranges from the identification of subsidiaries and participations to the elimination of inter-company transactions and the preparation of consolidated financial statements. Consolidation creates transparency with regard to a company’s net assets, financial position and results of operations and a consistent presentation of financial performance. There are four steps to consolidating financial statements into consolidated financial statements:
The clear presentation of the asset structure and the profit situation requires a uniform presentation of the individual companies. This applies to the accounting and valuation standards, to the balance sheet date and, if necessary, also to the currency if the group of companies is set up internationally. This can also present one or two challenges in detail.
The preparation of consolidated financial statements for your group of companies should be professionally prepared. With the right approach, the appropriate software support and a clever structure of the upstream systems, the consolidation of monthly and quarterly financial statements is also possible “at the push of a button”. Once implemented, planning data can also be mapped at the level of the corporate group.
The consolidated financial statements provide investors, creditors and other stakeholders with adequate information and a solid basis for important decisions. Therefore, consolidation should not only be seen as an obligation. The voluntary preparation of consolidated financial statements can have significant advantages for medium-sized companies: The central issue is transparency within the group of companies, since all business transactions are not only assessed in each of the trading companies, but also from the perspective of the group. The stakeholders benefit from this transparency because a concentrated view of the economic development is possible. The controlling possibilities increase significantly with the use of the right tool.
THE MAK`ED TEAM builds up your group accounting and consolidates the individual financial statements into a group financial statement according to appropriate standards with professional solutions. We prepare group financial statements along the entire process chain – from the individual financial statements to the commercial balance sheet and the consolidated financial statements. Here we mostly work with the software of the company LucaNet, of which we are a partner. The performance of this tool is adequate for all situations in accounting and controlling. With our expertise in accounting and group accounting, you will quickly achieve a good basis for the efficient preparation of your group financial statements.
Read more about LucaNet.
In the vast majority of cases, the financing of SMEs through bank loans is linked to the personal liability of the owners or managing partners. This is a standard collateralisation of commercial banks and savings banks, which is often justified with “If you don’t believe in your company, how can we as a bank? For the guarantor, the scope of liability resulting from the legal form of the company extends to the private sphere. If this constellation is not actively shaped, experience shows that there will be far-reaching consequences for the guarantor, but also for the company. In addition to liability for the company’s debts, there may also be restrictions on succession planning. The focus is on a clear financing strategy that includes the structuring of the liabilities side of the company as well as the conditions of the debt capital – including interest, collateral and covenants. Read more
“Financial communication” – many SMEs see it primarily as a task of listed companies. But it is of great importance, especially for small and medium-sized enterprises. Especially when a company is in a difficult economic situation. Companies that proactively implement transparent bank communication and thus build up a good relationship with their bank (creditor relationship) have a much better standing with their bank. Targeted financial communication with regular reporting improves capital access and conditions. It strengthens the bank’s confidence in its own company and can pave the way for better support overall.
The press releases are piling up: small and medium-sized companies are increasingly experiencing economic difficulties – many have concrete closure plans and are implementing them. The offers for sale are increasing. Energy shock, brittle supply chains, shortage of skilled workers and inflation are the reasons. Price increases are not only hitting their own profit and loss statements, they are also causing customers to hold back and lower sales. An analysis by the information service provider CRIF sees an increased risk of insolvency for around 300,000 companies in Germany. That is around 10% of the companies in Germany. The industries that are particularly energy-intensive have already shown significant increases in insolvency cases. This situation calls for attention and caution.
The planning of a company succession, the sale of the company or the departure of a shareholder: The company valuation can become relevant for very different reasons. Basically, the company value is an important criterion when a company is up for succession. The company value provides important guidance at all stages of the succession process: If an entrepreneur knows the company value at an early stage and if it turns out to be lower than desired, he may have sufficient time until the time of the planned sale to take suitable measures to increase the value. If the entrepreneur is weighing up various succession options, the company valuation is an important factor in the decision-making process. For example, in order to clarify whether the sum would be sufficient as retirement provision. Or to ensure fair distribution within the family succession. Or to discuss what tax effects an internal family succession would have. When it comes to a concrete sale, the company valuation is a critical decision-making basis for the negotiation talks.
No figures again? No up-to-date evaluations again? In many medium-sized companies, things are not running smoothly in the accounting department. The effort required to enter, print and check incoming invoices and receipts is often high and involves a lot of manual work. Staff shortages add to the stress. It is not uncommon for accounting to lag behind what is happening in the company. Then the entrepreneur lacks an overview of the economic development of his company – which makes decisions more difficult and involves risks. Every entrepreneur is familiar with the modern and sustainable solution, the digitalization of processes. However, the concrete implementation is lacking in many places. The digitalization of the accounting system is not a free skate for companies, but a duty, otherwise the company cannot be actively managed.
Digitization of accounting aims to automate routine activities and simplify individual process steps. And it succeeds quite pragmatically. Whether it’s invoice receipt, invoice approval, archiving or invoice issue, reminders or automatic account assignments: With the right tools, accounting processes can be managed efficiently, on a daily basis and transparently. To do this, the first step is to revise the processes: What needs to be changed, what needs to be redone and what can be retained? This is the core of digitalization in accounting, because if only the manual path of a paper invoice is digitalized, this does not lead to an improved process. In the course of digitalization, the opportunity should be taken to really improve processes and structures. Subsequently, based on the requirements, it can be clarified which tools can be used for the respective company. For example, this could be new accounting software, a document management system with font recognition. The right, GoBD-compliant tools significantly simplify the workflow through automated processes and can also be implemented as a first step as an isolated solution with manageable effort.
Digitized accounting works quickly, avoids errors and reduces the use of human resources. Cooperation with tax advisors, auditors and banks can be noticeably facilitated. On the other hand, management has an overview of the status of liabilities, receivables and its own liquidity through up-to-date evaluations. With a custom-fit solution, medium-sized companies can achieve efficiency gains and information advantages.
When THE MAK`ED TEAM supports its medium-sized customers in the digitalization of their accounting, pragmatic recommendations for action are developed on the basis of the individual starting conditions and the company’s goals. We have a high level of expertise in the establishment of new structures and the transformation of accounting and finance and know the decisive parameters for a successful and efficiently implemented digitalization.
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Accounting Compliance as a Basis for the Annual Financial Report
Ever thought of setting up a “bank”? That can be a smart move for medium-sized companies, too! There is a long tradition of companies setting up their own “bank” in the form of a lump-sum funded provident fund (pdUK). Legally, of course, it is not a “bank” in this case, but from a business point of view it is. This is why the pdUK is also known as the “entrepreneur’s bank” and was initially an instrument of large-scale industry for company pension schemes. But this model can also make sense for SMEs with 10 or more employees. If a company decides to set up its “own bank”, this brings many advantages for the workforce – and for the company itself. That’s why it’s becoming increasingly popular among small and medium-sized businesses.
The war in Ukraine is hitting large parts of the economy with full force. There is hardly a company that is not directly or indirectly affected by the consequences. “Cash is king” is especially true in crisis situations, and liquidity management is a vital instrument for making liquidity bottlenecks transparent or averting insolvency if possible. […]
Some companies take what feels like an eternity to prepare their annual financial statements. Other companies have prepared their annual financial statements one month after the balance sheet date – often also certified by the auditor. The “fast close”, i.e., the rapid preparation and – if necessary – the audit of the annual financial statements, provides stakeholders with timely information on the company’s assets, financial and earnings situation. Whether banks, suppliers, or management – up-to-date reporting is a competitive advantage and thus a real SME issue. How do you achieve high speed for your annual financial statement?
“Will the company continue? What do you mean? Yes, what else?”
This is a typical reaction of many managing directors when they are asked about the problem of whether a running business is to be assumed in a valuation of the company. The reason for this question may be overindebtedness or payment problems. In this case, the regulations of insolvency law give reason to assume that the company (GmbH, AG, GmbH & Co. KG) can no longer be continued. Therefore, in this situation, the management responsible for preparing the annual financial statements should not rely on the fact that it can continue to prepare the balance sheet at going concern values. It must first be ensured that the going concern premise is met, i.e., that it can be assumed in the evaluation of the company’s activities that it can be continued.
