- Each entity keeps its own books; a consolidation company combines them as business units.
- Currency translation is applied per account, so balance-sheet and income-statement accounts use the right rate.
- Exchange rates can update automatically by feed, or be entered manually when you want control.
- Intercompany activity is eliminated as a deliberate step so the group's results reflect only outside business.
Last Thursday, a controller at a small multi-entity group walked us through her month-end ritual. It'll sound familiar if your business is really several.
A holding company with two operating entities, or a U.S. parent with a subsidiary across the border, runs the same pattern. Each company closes its own books. Then someone exports everything into a spreadsheet, lines up the accounts by hand, converts the foreign entity into the reporting currency, strips out the sales the two made to each other, and hopes it's right. For this controller, a difference that wouldn't tie out cost most of a week, traced to one account at the wrong rate.
Dynamics 365 Business Central, Microsoft's enterprise resource planning (ERP) system for small and mid-sized businesses, is built to do this work. Consolidation's a structured process; once it's set up it runs the same every period.
Each company keeps its own books
Every legal entity stays its own company in Business Central, with its own complete books, running independently day to day.
For consolidation, you create one additional consolidation company whose only job is to combine the others. Each operating company becomes a business unit reporting into it, and you decide which ones roll up and how their accounts map into the consolidated chart.
That mapping is where the real care goes. The companies needn't share identical charts of accounts, but theirs must map cleanly into the consolidated chart, so every entity's cash lands in consolidated cash.
Currency translation, the part people get wrong
When an entity keeps its books in another currency, consolidation translates its balances into your reporting currency, and not every account should use the same rate. Business Central sets a translation method per account: Closing Rate for balance-sheet accounts, at the period-end rate; Average Rate for income-statement accounts, at the period's average rate; Historical Rate for accounts that should hold the rate in effect when the transaction occurred; Composite Rate, combining current-period activity at the average rate with the prior balance, often for retained earnings; and Equity Rate, similar to composite, with differences posted to designated accounts.
Applying the correct method to each account, rather than one rate for all, is the difference between a consolidation that ties out and one that's quietly off.
Exchange rates: automated feeds or manual entry
Business Central keeps rates current two ways. Automated exchange-rate feeds connect to an external rate service so rates update on a schedule, removing a manual step and a common error for groups consolidating monthly across currencies. Manual entry suits an entity that consolidates infrequently or wants tight control over the rate. Most multi-currency groups settle on feeds, overriding when finance has a reason to.
Intercompany eliminations are a deliberate step
If your entities do business with each other, say your subsidiary sells components to your parent, those internal sales and balances have to be removed during consolidation. Otherwise the group looks like it sold and owes more than it did, the same transaction counted in both companies.
This is called elimination, a deliberate step in Business Central: you identify the intercompany activity and post eliminating entries, so the group's results reflect only what it did with the outside world. A separate intercompany feature manages transactions between entities as they happen, making eliminations cleaner because the activity's already tagged when you consolidate.
Consolidation rolls the companies together. Intercompany manages the transactions between them. A good setup uses both, so activity needing elimination is easy to find at month-end.
What this buys you
Set up properly, the consolidated financials come from a repeatable process rather than a spreadsheet one person understands, with currency and eliminations correct every period and an audit trail for how the numbers were produced. It doesn't remove the need for a thoughtful accountant; it removes the mechanical parts, freeing them for judgment over data entry.
It all rewards careful setup. Account mapping, translation methods, and intercompany design are easier to get right at the start than to untangle a year in, so do it with someone who's done it before.
Let's talk it through
If you're stitching multiple companies together by hand each month, or about to add an entity and want the structure right from the start, we're glad to walk through what a clean consolidation looks like for your group. We start from the consolidated statements you need and design the setup that produces them. Reach out and we'll map it to yours.