Page 312 - Accounting Best Practices

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14–9 Have Subsidiaries Update Their Own Data
14–9 HAVE SUBSIDIARIES UPDATE THEIR OWN DATA 301
IN THE CENTRAL GENERAL LEDGER
A lengthy task for any general ledger accountant who must consolidate the
results of subsidiaries is to input the general ledger of each one into the general
ledger of the corporate parent. This can be a lengthy and arduous task, as well
as one that is easily subject to error. The typical consolidation requires a very
large journal entry for each subsidiary, possibly requiring over a hundred
accounts. If there is any problem with the data entry, the entire entry must be
reviewed to find the mistake. If there are many subsidiaries, there are many
entries to make; if there is a time crunch associated with producing financial
statements, it is extremely likely that all of the data-entry work required of the
general ledger accountant will be a bottleneck for the timely production of
those statements.
The solution to this quandary is to hand the data-entry chore over to the sub-
sidiaries. They can be given access to the computer system of the corporate parent,
with modems, as well as password access to the general ledger, and then enter
their financial results directly into the computer system. The general ledger
accountant thereby avoids all data-entry work related to the subsidiaries and only
has to analyze his or her own data inputs to see if there are any unusual items. By
having each subsidiary enter its own information, the data can be entered much
more quickly, resulting in the elimination of the workflow bottleneck associated
with this task. In short, a relatively simple system change can improve the effi-
ciency of periodic corporate consolidations.
There are a few issues to consider before attempting this best practice, however.
First, there is a minor expense associated with giving modems to all subsidiaries.
This expense will include the cost of a direct phone line for each computer so
equipped (though this also makes those computers useful for other modem-related
tasks, perhaps justifying the cost in this manner). Also, there must be password pro-
tection for anyone dialing into the main computer system, since there is always a
risk of someone hacking into the computer and destroying or accessing sensitive
data. Another issue is that, by giving access to many people, the number of users
accessing the system at one time may rise, which may require the purchase of addi-
tional user licenses (if the system is a third-party package that uses a licensing fee
arrangement). Finally, all the new users must be trained in how to make a journal
entry in the corporate computer system, which may require nothing more than an
instruction sheet, but which may require travel to all locations to conduct a short
training class. If all of these issues can be dealt with at minimal cost, then having
subsidiaries enter their own data into the corporate general ledger can improve the
efficiency of that function.

Cost: Installation time: