Navigating NetSuite's Subsidiary Structure

NetSuite OneWorld provides companies with multiple subsidiaries to report on their business from either an individual subsidiary perspective or a rolled-up Parent Co perspective with combined figures all translated to the base currency of the Parent Co.

NetSuite subsidiary structures can work in one of 2 ways:

  1. A flat reporting structure - This is where all trading entities sit in a flat line below the Parent Company.

  2. Tiered reporting structure - This is where subsidiaries sit below the Parent Company in a tree-style format where one subsidiary rolls up to another subsidiary and then both entities roll up into the Parent Company.

Prior to implementation, defining your company structure and confirming which entity rolls up into another, and the reporting output you require, is vitally important. Once these are defined in NetSuite it is very hard, if not impossible, to change. Therefore, you want to make sure your structure is correct, and you are happy with how the NetSuite Consultant is going to implement this structure to your system design.

There are two key elements when it comes to the subsidiary structure:

  1. Consolidated Reporting

  2. Intercompany transactions

Consolidated Reporting

What needs to be considered here is looking at your company and how you report on an individual basis and a consolidated basis. When setting up your structure NetSuite will report accordingly, getting this structure right will allow for greater clarity on reporting and the figures presented in NetSuite.

Intercompany transactions

A multi-subsidiary NetSuite account allows for intercompany trading, and with this there are three things to consider when establishing your structure.

  1. Elimination – Whenever you set up your subsidiary structure in NetSuite there is a requirement for an “Elimination subsidiary” set up for each level of the subsidiary structure. This means that when an intercompany transaction occurs, after running period-end these transactions are posted to the elimination subsidiary, opposed to presenting in the consolidated reporting. This effectively zeros out the balance on each of the subsidiary ledgers, meaning you aren’t accounting incorrectly on your financial statements for a consolidated view.

  2. Each individual entity requires intercompany customers and vendors that represent the other subsidiaries. This means that when these entities are used they are automatically tagged for elimination based on the accounts they are posted to. This removes the risk of transactions being missed when manually eliminating Intercompany transactions.

  3. Intercompany Purchase Order/Sales Orders – when creating a Purchase Order using an intercompany vendor this allows for automatic creation of a Sales Order in the subsidiary you are wanting to trade with. This removes the risk of one subsidiary creating the purchasing transaction but the other subsidiary not creating the sales transaction. It maintains each subsidiaries accounts and keeps them entirely up to date.

As always with these guides, if you have any questions or queries please feel free to contact us here or leave a comment in the comments section below and we will be sure to try our best to help you in whatever way we can!

 

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