Multiple companies

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Posted on by phri

I'm sure this has been asked before, but I'm in the process of implementing GP and trying to decide if I need separate companies/databases or if I should combine multiple companies into a single database/chart of account. We have 8 branch locations that are all providing similar healthcare services and have similar (nearly identical) charts of accounts in our old accounting system. All 8 locations are also separate legal entities, but we have a centralized corporate function that provides shared services (payroll, billing, HR, IT, etc.) What are the advantages/disadvantages of combining all entities into one GP database vs creating separate companies?

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Frank Hamelly | MVP... 46,625 Super User 2025 Season 2 on at

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If the branches are separate legal entities, from an accounting/tax reporting perspective you must set up separate databases. You can't combine the results from separate legal entities into one database.

Hope this helps,

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callen 4,595 on at

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I would agree with Frank. I would also add there are third party apps, like Binary Stream's Multi-Facility Processing, that can help you use a single database but keep the records separate.

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Richard Schultz 1,085 on at

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phri,
Having separate databases is not a legal requirement - the requirement is to keep the books separate for legal entities. This can be done rather easily by designating a "company" segment in your chart of accounts. For example, if your Salary account is 5100, and you have 8 companies, your salary account for company 3 would be:
5100-03
Keeping all your data in one database greatly facilitates reporting, and makes data entry easier because your data entry folks can stay in one instance of GP (they'd have to switch companies to enter data in different companies; seems like a small thing, but after you do it 10 times a day for several months...you can imagine).
The only reason you HAVE to use separate databases is if you have separate functional currencies (per FASB 52). If all your companies have the same functional currency, that's not an issue.
Either way, you'll need to ensure that your staff are fully capable of keeping the data separate. People will tell you that enforcing separation by having separate databases/companies is necessary, but I've seen many cases where data operators put data into the wrong company because they didn't feel like switching. I'd stick with one company, and write some good diagnostic reports to ensure data was going into the right legal entities. Also, segregate duties sufficiently so that each data operator is inputting to the minimum number of companies necessary.

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Frank Hamelly | MVP... 46,625 Super User 2025 Season 2 on at

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Richard, I agree mostly with what you say. However, the exception I would take is what happens when you need to print 941s or W2s? If you put all legal entities in one database, how do you get the correct FEIN on each entity's reports? You enter the FEIN in Company Setup and only get one FEIN per company.

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Shahid Ghafoor 1,445 on at

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Frank Hamelly is right All the companies have Separate legal entity. The Richard suggestion applies where all the companies have a single legal entity.

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Richard Schultz 1,085 on at

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Agreed on the FEINs/W2s, at least with the stock reports. That said, one could write those reports in Crystal, inserting alternate FEINs (or whatever other corporate number is necessary) per company segment. The question is whether the cost (short and long term) is greater with separate GP companies (but using the stock reports for these kinds of forms) or maintaining only one database with a requirement to add custom reports.
For a situation with 2 or 3 companies, it might very well be easier/cheaper to go with one database per company; however, with 8, I think the case can be made that a single entity may be worth the extra up-front cost of the additional reports.
I can say that I know one company that does exactly that - they have 8 or 10 (can't remember right now) companies in the US, two in Canada, and one each in the UK and France. They have one database per currency, for the reasons I listed earlier - maintenance is just so much easier.

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gkalm 125 on at

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We have 10 separate companies in GP and while it is a pain to have to get in and out of each company for data entry, I still think it is the best way to go. I would highly recommend getting the Intercompany module as that does make life easier. Plus with SQL views in Crystal and FRx, multicompany reporting and consolidation is a breeze.

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Richard Schultz 1,085 on at

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You mention using SQL views for consolidation - are all your companies on the same functional currency, then?

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MG-16101311-0 26,225 on at

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Gentlemen,

Here are some reasons to have separate companies:

1. Different legal entities, i.e., different FEIN

2. Company has different functional currencies or is located in other countries, hence different tax jurisdictions.

3. Customers view the two companies as separate, hence expect separate statements from each, which implies separate aging reports, and separate customer service departments.

4. Vendors view the two companies as separate, hence expect separate payments from each, even if one company pays on behalf of the other.

5. Each company track inventory differently, for example one on FIFO perpetual the other one on LIFO

6. One could also argue that a lot of the reporting can be accomplished with Crystal/SSRS, however, if you start to see yourself thinking about this too much, then most likely you are better off with separate companies.

7. Each company has its own accounting staff.

8. Each company has its own employees and do not share them, and issue payroll separately from each other.

Subsidiaries do not count as separate companies, though I have seen them managed either way (as separate companies or as one database with a company account segment).

I have seen companies go down the one database path, only to regret it down the road. I have seen companies gone down the multiple databases path, only to regret it too. However, there is not one definate clear cut as to what would make one company go down one road versus the other.

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Community Member on at

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Very well put Mario.

Overall, I think there are more reasons to seperate the companies than join them up. I have had customers in the past who have combined companies and it has always led to problems. I have recently started working with a customer who yeas ago went down the 'multiple entities in a single database' route, they have a number of 'Combined' databases. We are now seperating them out into individual companies...and its a lot of work.

Financial consolidation is relatively straighforward, and you can consolidate sub ledger transactions in SSRS or some other reporting tool if you need to issue consolidated statements to customers for example. All in all, seperation avoids a lot of problems.

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