A business that runs more than one company keeps a separate set of records for each legal entity. Each entity has its own accounts, its own tax registrations and often its own bank accounts. A multi-company ERP holds those entities in one system while keeping their figures distinct, so the group can trade between them, report on them and consolidate them when needed.
This article looks at the questions that come up with a multi-company ERP for UK groups and for businesses that export. It covers how the group can be structured in the system, which master data is shared, how intercompany trading works, what consolidation means at a general level and how multi-currency accounting fits in.
The guidance is general and is not accounting, tax or legal advice. Everything depends on how the group is set up, so take advice from your accountant and advisers before making structural decisions.
What counts as a multi-company ERP set-up
The word company is used loosely. In a multi-company ERP, the units that matter are the legal entities the business has registered, together with any branches, divisions or trading names that sit within them. Each unit may need its own accounts, tax treatment and reporting.
Legal entities, branches and trading names
A legal entity has its own accounts and its own legal obligations. A branch is usually part of the entity that owns it, and a trading name is simply a name under which an entity trades. Confirm which of these you have before the system is designed, because the structure drives the set-up.
Why divisions are not always separate companies
Some businesses organise by product line or region but keep a single legal entity. Reporting can then show each division as a cost centre or an analysis dimension, without maintaining separate sets of accounts. Decide this on the group's legal and management needs, not on how the organisation chart looks.
Choosing a multi-company ERP structure: one database or several
A multi-company ERP can be set up in more than one way. Some systems hold several companies inside one database, with the data kept apart by company. Others use a separate database for each company. The right choice depends on how much the companies share and how closely they need to be reported together.
Shared database or separate databases
A shared structure makes group reporting, shared master data and intercompany trading simpler, but it needs careful access control so that one company cannot see another's records by mistake. Separate databases give stronger separation, yet they make the group view and shared records harder to keep in step.
Access and reporting across companies
Whatever structure you choose, decide early who can see which company, who can post to which, and who can run group reports. Users should see only the companies they work in. Group finance may need wider access, provided the rules for that access are clear and written down.
Shared master data: customers, suppliers, items and prices
Some records belong to the group and some belong to a single company. Mixing them up is a frequent source of duplicate data. Decide which master records are shared before any transactions are posted.
Deciding what is shared
Items and suppliers are often shared across a group, because the same product or supplier may serve several companies. Customer records can be shared or kept separate, depending on whether the companies sell to the same people and on what each company is permitted to do with that information.
Local and group pricing
A group may set a common price list and let each company apply local discounts or local-currency prices. Write the rule down. A pricing structure understood by only one person in one company will produce inconsistent quotes and invoices.
Personal data and sharing between companies
Sharing a customer record between group companies is still processing personal data under the UK GDPR. Each company may have its own obligations, and the purposes for sharing should be clear and documented. The Information Commissioner's Office publishes general guidance on this. Take advice for your own situation before deciding what to share.
Intercompany trading: recording sales and purchases within the group
When one group company sells to another, the transaction must appear correctly in both sets of accounts and then be removed when the group is presented as one. An intercompany sale is still a real transaction for each company, so it needs proper invoices, purchase records and settlement.
Intercompany orders, invoices and matching
Set up a clear route for intercompany documents, such as an intercompany order that creates a matching invoice in the other company. Matching should happen automatically where the system allows, with exceptions shown rather than hidden. An unmatched intercompany balance is exactly the sort of gap a reviewer will ask about.
Settling balances between companies
Decide how intercompany balances are settled, whether by bank payment, netting or a periodic journal, and who approves the settlement. Agree the timing with whoever manages cash. Balances that sit for long periods make the group figures harder to explain.
Transfer pricing and the rules behind it
When companies in a group trade with each other, the prices they charge may be subject to transfer pricing rules. These rules are technical and depend on the facts. The ERP can record the prices used, but deciding what those prices should be is a tax question, so take specialist advice before setting them in the system.
Consolidation at a general level
Consolidation brings the accounts of the group companies together into one set of group figures. It removes the effect of trading between group companies, so the group does not appear to have sales or stock that it does not really hold.
Eliminating intercompany trades and balances
Intercompany sales, purchases, receivables and payables are removed from the combined figures, so the group reports only its dealings with outside parties. Good intercompany records make this step simple. Poor records turn it into a monthly exercise in chasing differences.
Bringing different charts of accounts into one structure
Each company may use a slightly different chart of accounts. Consolidation needs a mapping that brings those accounts into a common group structure. Agree the group chart early, and keep each local chart as close to it as the business allows, so the mapping stays manageable.
Timing: when the group figures are ready
Consolidation depends on every company closing on the same calendar. If one entity closes late, the group figures are late too. Set a shared close timetable, agree cut-off dates for intercompany transactions and decide in advance what happens when a company misses its deadline.
Multi-currency: transaction, functional and reporting currency
A multi-currency ERP records transactions in the currency they were agreed in, then translates them into the currency the company reports in. Keeping those steps separate is what allows exchange gains and losses to be read correctly.
Three currency roles to keep apart
The transaction currency is the currency of the invoice or payment. The functional currency is the main currency of the company's operating environment. The reporting currency is the currency used for the accounts being presented. These can be the same, but they do not have to be, and the system should show which role each amount plays.
Exchange rates: source, date and type
Every foreign currency transaction needs an exchange rate, and each rate needs a recorded source and date. Decide whether rates are set daily, per period or per transaction, and whether the business uses a published rate or a rate agreed with its bank. Record the rate type in the system so it is clear which figure was applied.
Revaluing foreign balances at period end
Receivables, payables and bank balances held in foreign currency are usually revalued at the period end using the closing rate, and the resulting exchange difference is recognised in the accounts. Differences arising on settled transactions are treated differently from those on balances still open, so the ERP needs to keep the two apart.
Exporting businesses: pricing, customs and documents
A business that sells outside the UK adds questions about price, delivery terms, customs and VAT. An ERP can hold the information needed to answer them, but the rules change, and they depend on what is sold, where it goes and who is responsible for moving it.
Agreeing who pays for what
Export pricing usually depends on agreed delivery terms, often called Incoterms, which set out when responsibility and costs pass from seller to buyer. The ERP should record the terms on every order and invoice, so freight, insurance and duties are not handled inconsistently. Take advice on which terms suit the trade.
Customs information and EORI numbers
Goods moving across borders usually need customs declarations and the right commodity codes. A business making customs declarations generally needs an Economic Operator Registration and Identification (EORI) number. The ERP can store product codes, origins and consignment details, so the documents are produced from the same record.
VAT on exports depends on the facts
The VAT treatment of an export depends on what is sold, where it goes and the evidence held. The ERP needs tax codes that reflect each treatment, and the people setting them up should agree the rules with an accountant or tax adviser. Do not assume a single code can cover every overseas sale.
FAQ
What is a multi-company ERP?
A multi-company ERP holds several legal entities in one system, keeping each company's records separate while allowing group reporting, shared master data and trading between companies. It can be set up within one database or with a separate database for each company. The right design depends on how closely the companies trade and report together.
How does intercompany trading work in an ERP?
One company records a sale and the other records the matching purchase, so both sets of accounts are complete. The balances are matched, settled and removed when the group accounts are consolidated. Prices between companies may fall under transfer pricing rules, so take advice before setting them.
What is consolidation in simple terms?
Consolidation combines the accounts of the companies in a group into one set of figures for the group as a whole. It removes trades and balances between group companies so they are not counted twice. The process runs more smoothly with a common chart of accounts and a shared close timetable.
What is the difference between functional currency and reporting currency?
The functional currency is the main currency of a company's operating environment, while the reporting currency is the one used for the accounts being presented. They can be the same, but they are not always. The ERP should record which currency each amount is held in, so translations stay clear.
Do exporters need a special type of ERP?
Not necessarily, but an ERP used for exporting must handle delivery terms, customs information, currency and VAT consistently. Many standard systems can be set up to handle this, although the configuration needs checking. The rules themselves come from customs and tax guidance, so take advice on the treatment of each type of sale.
Can group companies share customer records under UK GDPR?
Group companies are usually separate legal entities, so sharing personal data between them is still processing under the UK GDPR. Each company needs a clear purpose and a lawful basis, and customers should be told how their data is used. The Information Commissioner's Office publishes general guidance, but you should take advice for your own situation.
Final thought
A multi-company ERP works when the group decides its structure first and the system follows it. Entities, shared master data, intercompany rules, currency roles and close timetables each need an owner and a written rule, so the figures can be trusted at company level and at group level.
The areas that tend to go wrong are the ones that cross company boundaries: intercompany balances that never match, customers duplicated between entities and exchange rates applied in different ways. Testing those flows with real examples before go-live is much less work than explaining a difference at year end.
If you are weighing up how to structure a group in one system, Mirex Agency can help you map the companies, the flows between them and the reports you need, alongside advice from your own accountant. You can reach us at hello@mirexagency.com.
