5 reasons why you should outsource your consolidations
Group consolidations and group financials are a process that many real estate companies perform in-house. Basic two-tier consolidations are usually completed on Excel, however, consolidations with multiple tiers across multiple jurisdictions can get more complicated and as a result require both real estate knowledge and technical accounting expertise.
Deciding to outsource your consolidation requirements is a strategic decision, and we look at the 5 top reasons why you should consider outsourcing your consolidations to a specialist real estate accountant.
Your company is growing
If your group structure expands very quickly, either from natural growth or acquisition of a portfolio, you might not have the in-house capabilities to handle those complex consolidations.
For example, you may have acquired a portfolio of properties and SPVs that span different geographies, and you now need to interpret international accounts and work with third party property managers while retaining a full audit trail. There is a risk of encountering problems trying to report under the various jurisdictions.
You need access to real estate specialists
The complexity of compliance is increasing, and if your employees have limited real estate accounting knowledge, you run the risk of errors occurring. However, if you outsource to a specialist who is 100% real estate focused, you mitigate the risk as they are best placed to manage the process and can meet compliance requirements.
“We are aware that service charge is treated differently in Germany (Income Statement) compared to the UK (Balance Sheet) and consolidation adjustments are required to align into a uniform treatment. Similarly, German GAAP instructs depreciation, so consolidation adjustments are required to convert into fair value under International Financial Reporting Standards (IFRS). We recognise this conversion, and without the property experience, you might not recognise this.” Darragh Comer, Head of Corporate Accounting at Avignon Capital.
You need access to technology
If you are getting fed up of errors using Excel, then it is time to think about investing in specialist software that has controls in place for accuracy. Investing in your own software can be expensive, however by outsourcing to a real estate accountant, they will already have software in place, so you do not have to think about the setup and configuration of a new system.
Leading real estate software such as Yardi Voyager is a fully integrated real estate software solution which enables accounting to be managed efficiently from a single point.
Time effective
Your time is a valuable resource, and when you outsource, you have access to a whole team of accountants who can always deliver. You might have tight reporting deadlines for your shareholders and having an entire team on hand provides reassurance that deadlines will be met.
An experienced accountant can very quickly set up a new entity on Yardi Voyager by just using a simple structure chart, and they are skilled at translating third party accounting information (often in foreign languages) into the system promptly.
Cost-effective
A benefit of outsourcing is that you do not have to invest in costly consolidation software as this cost is within the fixed fee of the service level agreement. Moreover, by outsourcing, you do not have to take the risk of expanding your finance team and incurring costs of the recruitment process.
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The decision to outsource your consolidation needs is a strategic one that can help your company enhance its operations and performance.
Avignon Capital provides specialist real estate accounting to support real estate owners and managers. With our experience working across international accounts with third party property managers, we can provide a 100% real estate-focused solution.
Find out more about our multi-tier and multi-jurisdictional consolidation services here.