Implementing Consolidated Reporting to Achieve Sustainable Growth

The Challenge: Managing Multiple Entities

Our Approach: Organizing Financials and Optimizing Operations

Keeping a single organization’s financials in check is difficult enough for business owners. Without the proper systems in place, reports can get complicated very quickly. And as a business grows and expands, those problems always follow suit. We typically see businesses with subsidiaries housed under one holding company, which can present some challenges when organizing financial reports. Now, imagine if that organization is made up of several businesses under several different holding companies. We were faced with this issue when we first started working with one of our long-term clients back in 2020. Here is where they stood, how we approached their situation, and the results we are still seeing today. 

Happy Business Woman Owner who was helped with finances by Fox and Partners CFO services

Multiple Entities to Manage 

This particular client’s business was made up of several holding companies with multiple locations and subsidiaries within each, all of which were experiencing high levels of growth. These holding companies were beneficial because they protected ownership from losses experienced by any individual subsidiary. (i.e. If a subsidiary declares bankruptcy, the holding company shields the owner from having to do the same. Creditors go after the subsidiary, not the holding company.) 

Because there were so many moving parts to this organization, financials, and reporting could get complicated very quickly. The data in the reports for subsidiaries is meant to match that for their holding companies, but no one was ensuring this was the case. So, their reports were not accurate or current. 

Additionally, there was no reporting on how this portfolio was doing as a whole. Even if ownership could see how one location or one holding company was performing, this did not give them a clear picture of the performance of all of their holding companies, or their portfolio as a whole. Therefore, any strategy they had in place was based solely on how they felt they were performing, without taking actual data into account.  

Unsustainable Growth 

The fact that the business was growing rapidly only exacerbated the issue. The client had ambitions to expand by a certain number of locations, but that number was not based on any data. They were growing, but that does not mean their growth was healthy.  

While scaling is a great goal, it is not going to solve all of your problems. In fact, expanding before you ensure that your business is healthy only ensures that the problems ownership is facing will multiply, making it even more difficult to rectify.   

We see this often: Business owners will set a goal that they believe will make them profitable, for example opening ten locations. While it may be true that the tenth location would mathematically put them in the black, will they actually make it to ten locations? Or is it more likely that they’ll have to close their doors before they reach that number? We find that it’s better to make those first locations profitable before expanding, so that is a goal we set for this particular client.  

We compiled a list of all of their properties and businesses (about 15 entities in total), creating both a list in Excel and a visual to help them (and us) better understand the full picture. We do this so we can add notes and thoughts in the spreadsheet, but then also have a clear visual representation of the company.

Once we had the full list of entities, we set up a QuickBooks Desktop account for each one. On the Excel spreadsheet, we noted how many bank accounts they had, if the property had a loan, the intent of the property (flip or hold), and the equity structure of the business. We then went about making sure we had all of the necessary documents, including HUDS, business formation documents, operating agreements, loan documents, bank accounts, and bank access for these entities.

Our Contributions

Once we had all of this detail, we began creating the financials for each entity. If the company was in business the previous year, we used the last tax return as our beginning balance sheet. We reconciled the bank account through to the current month, then reviewed the financials with the owner to ensure that every single line item on those balance sheets could be traced back to a source document. (For example, equity would be tied to a partnership agreement, or a contractor’s fee would be tied to an invoice.)

Over the next few months, we continued to tweak the financial statements and review process with the business owner. This is helpful because over the course of a few months, transactions or items will come up that may have initially slipped the business owner’s mind, or we will realize we should consolidate or expand certain accounts.

The Results 

The organization now has clean, accurate, and current books for every single branch of their business and can see how each asset is performing individually, and as a whole, at a glance. We still have monthly meetings to go over these numbers and ensure that everything is running smoothly. 

The client has saved six figures in costs annually through our efforts, and they have doubled their annual gross revenue. Additionally, they have improved their quick ratio (current assets divided by current liabilities) by 50%. With the organization now on much more stable footing, they are safely expanding and doubling their number of locations. 

After four years of partnership, we are still working with them each month to ensure continued, healthy growth. If you are interested in results like these, please reach out to us today to find out how Fox & Partners can help improve your business’s finances. Finally, we had many conversations with our client in order to understand their vision for the business as a whole. With that knowledge, we helped them to build a business plan, set goals, and formulate OKRs (objectives and key results).With this information we were able to understand the big picture, look ahead and put a plan together to build wealth. All along the way, Fox & Partners provided a calm and organized presence. Within four months, we had reconciled thousands of transactions, created clear reports, and allowed our client to feel a sense of ease while providing investors with the insights they needed.

Let’s Work Together

With a wide range of knowledge, including finance, marketing and vision building and an ability to bring-in and communicate with various specialists to ensure optimal care, Fox and Partners is uniquely suited to bring to the business world what the medical world has had for decades – a warm first point of contact, a professional with a breadth of knowledge and coordination for all of your business and financial needs.