3 ways accounting software streamlines financial management for Private Equity firms
3 ways accounting software streamlines financial management for Private Equity firms
With approximately £250 billion actively invested in UK companies, Private Equity plays a critical role in supporting businesses. Yet, managing the financial complexity of diverse portfolios can be a major challenge. Private Equity finance teams must consolidate accounts across multiple funds and SPVs, a task far more intricate than standard consolidation. This challenge is compounded by investee companies using various accounting systems, from startup-focused to enterprise-level platforms.
Operating across multiple regions adds further complexity, particularly for intercompany transactions, as firms require software that seamlessly handles multi-currency and FX issues. Private Equity firms need software that can effortlessly manage these challenges. These demands can leave finance teams spending days each month manually preparing reports in Excel, often without the detailed insights and non-financial KPIs needed for investors, many of whom are not finance experts.
Given the fast-paced nature of Private Equity, professionals need tools that enable them to manage portfolios efficiently and respond quickly to new opportunities. Here, we outline three ways accounting software streamlines financial management for Private Equity firms.
1. From complexity to clarity: Effortless fund and FX consolidation
There’s no set rule, but Private Equity funds managed by a firm can have on average 10-20 companies in their portfolio, with larger funds having many more. They can also manage SPVs, which are legal entities used to pool funds from investors to invest in a startup and other subsidiary companies. For finance teams, the real hurdle is achieving seamless, continuous accounts consolidation across the entire portfolio.
One of the main qualities of the latest cloud accounting software is that it can consolidate any number of funds, SPVs and entities in just one click. This allows finance teams to monitor the financial activity of their whole portfolio in near real-time, tracking expenditures and simplifying intercompany transaction processing. Moreover, they can access full multicurrency capability for funds and SPVs across multiple jurisdictions eliminating complicated currency and FX calculations and increasing the accuracy of their reporting.
2. Seamless connections: centralised data management
Many funds switch between multiple platforms for tasks like expense management or CRM. This means finance teams have to manually collate and re-key data from different sources into their main accounting system. What these teams need is a central cloud finance system that can seamlessly integrate with other business and accounting apps, like Salesforce and Expensify, and store all of this data in one location. By automating data input and consolidation processes, these platforms save teams countless hours on manual tasks, streamlining their workflows while simultaneously improving data accuracy.
With data centralised, cloud-based, secure and accessible from anywhere 24/7, finance teams then have constant real-time visibility over both the portfolio and their firm’s overall financial health. Crucially, this means they can gain better insights and use their time to derive greater value from their investments.
3. Smarter Insights: The numbers you need fast!
As well as having an overall view of funds at a portfolio level, finance teams also need to be able to report on entities on a much more granular level...The latest accounting software offers intuitive dashboards that enable finance teams to establish up to six business and reporting dimensions. For instance, they could create one for ‘location’, another for ‘department’, and a third for ‘category/sector’. They can then input KPIs and align these with each dimension to provide detailed business intelligence reports to partners and stakeholders.
These interactive dashboards provide significant flexibility in how information is shared, and what is reported on and give stakeholders a visual overview of reporting data, meaning they can slice and analyse data in various ways. So while each entity may have its unique chart of accounts, these consistent summaries keep all parties in the know on the performance of investee companies and provide full financial visibility.
Enhancing Private Equity operations
With diverse portfolios of investee companies and SPVs, finance teams in Private Equity face a range of complex accounting challenges, including consolidating accounts across portfolio companies, managing multiple currencies, and generating consistent reports.
The latest cloud accounting software on the market can remove this complexity. Offering automated accounts, FX consolidation and seamless integrations, finance teams can access data on all their funds through a single source of truth – and without having to manually enter data themselves. With this real-time insight, they can use interactive dashboards and six-dimension reporting to provide detailed analysis to stakeholders and help inform investment decisions.
In such a fast-moving investment landscape, effective accounting software is essential for Private Equity firms to enhance their operations and drive overall growth.
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