Microsoft Dynamics 365 Solutions for Growing Companies Expanding Abroad

When analyzing companies’ requirements for a new information system, we often find that certain problems come up more frequently than others. In today’s article we’ve put together an overview of the situations that most often cause headaches for CFOs at mid-size and large companies. We’d also like to show you how these situations can be addressed in the modern ERP system Microsoft Dynamics 365.

Headache One – Timely Reporting of Consolidated Financial Results

Get consolidated financial results for the entire group on time, thanks to advanced reporting tools.

A typical problem that almost everyone struggles with, especially companies operating in an international environment. Reporting financial results to management and shareholders is very labor-intensive, and preparing the data for company-wide reporting can take several days. As a result, results can’t be reported on demand, but perhaps only once a month. That can have a negative impact on how the company is run, because management doesn’t have the information it needs for decision-making in time.

Reporting data arrives gradually from other countries or branches, and it first needs to be transformed so it’s comparable across the board – unifying the values of financial dimensions (countries, cost centers), or mapping the numbering in a local chart of accounts to a shared reporting chart of accounts. Transaction amounts posted in each country company’s local currency also need to be converted to a common reporting currency, using the correct exchange rate. Only once the data has been transformed can the relevant financial result reports be produced.

A key feature of the Microsoft Dynamics 365 system is that all accounting transactions for every company in the group are recorded in one system, in one database. That means data from all companies is available for reporting at any moment, online, without delay. The laborious data transformation goes away thanks to tools that handle it for you – take shared reference data, for example: across different companies you can share master data such as financial dimensions, fixed asset cards, products, and more. If all your companies use, say, shared financial dimension values and a unified organizational structure, there’s no need to laboriously transform the data for reporting.

Some reference data is better handled through mapping, which is typical for the chart of accounts. The local chart of accounts is mapped to the reporting chart of accounts, so costs or revenues booked to accounts in the local chart are automatically assigned to the corresponding shared reporting account. As part of data consolidation, you have very flexible control over which exchange rates are used to convert transactions from each company’s local currency into the reporting currency. The system also supports posting on multiple ledger layers, making it easy to distinguish in reporting between postings under the local accounting standard, IFRS, or US GAAP. On top of that, the system includes the advanced Management Reporter tool, which lets you generate reports on a regular schedule and distribute them to users according to rules you define.

Headache Two – Costly Expansion into New Countries

In new information system selection processes, we increasingly run into CFOs of Czech companies expanding abroad and opening branches there. It’s a trend of recent years, driven by the absence of trade barriers (the EU’s duty-free zone), but also by the strong competitiveness of Czech companies. A typical such Czech company uses a domestically developed information system for purchasing, sales, logistics and finance – one built around Czech, and sometimes also Slovak, legislation.

Focus your energy and financial resources on your business – not on making the legislative adjustments your system needs.

The moment a company expands abroad, its existing system stops being able to cover legislative requirements – things like VAT reporting, functionality such as EET (more on our EET CZ solution in Microsoft Dynamics 365 here – EET is the Czech electronic sales registration system), EU obligations (Intrastat, EC Sales Lists), or other country-specific functionality (such as fixed-asset depreciation calculations or advance payment tracking). Alternatively, keeping the system compliant with the legislation of every additional country becomes very costly and consumes a great deal of effort across the company.

Microsoft Dynamics 365 is a system built, and long oriented, for international companies, letting you use a ready-made solution without extra expansion costs and keep the company’s energy and financial resources focused on the business itself. The key building blocks of this system are built-in legislative support for 36 countries, plus the shared reference data already mentioned. Rolling the system out to a new company abroad then comes down to three steps. The first is creating the company itself and configuring the system’s basics. The legislative layer is automatically available, so this step is just user configuration matching that country’s legislative requirements and conventions – no programming, no extra cost.

The second step is data migration. If you use a shared product catalog, a shared organizational structure, and other important reference data, there’s no need to migrate any of it – you simply make it accessible to the new company as well. So for newly established branches abroad, we can essentially cross migration costs off the list. The third step is configuring the company’s core processes – purchasing, sales, logistics, manufacturing. This step is the critical one for the company’s ongoing operation, and thanks to the effort and cost saved in the previous steps, you can devote your full attention to it.

Full description of the EET solution for Dynamics AX (PDF)

Headache Three – Will We Have Enough Money?

A third topic that comes up often in conversations with CFOs is insufficient visibility into the company’s current financial position and its outlook. We don’t know how much money we’ll have in our accounts in 14 days, or in a month. We can’t predict how much we’ll need to cover all future expenses. We lack the information to decide whether we need to take out a bridging loan, with the interest that comes with it. And it’s impossible to responsibly identify the right moment for major investments.

The tool that addresses this need for information about future income and expenses in Microsoft Dynamics 365 is Cash Flow Forecasting. Based on current account balances, expected receipts (unpaid customer invoices) and expected payments (unpaid vendor invoices, VAT), the system shows the projected cash position for any future date. The cash flow forecast becomes more accurate the more information feeds into the model. Besides the Receivables and Payables modules, the Budgets module can also be included in the cash flow forecast, capturing things like future payroll or rent expenses.

The Fixed Assets module (depreciation), the Human Resources module (accounting for employee costs based on the hiring plan), the Projects module (planned contractor fees and, say, travel expenses, planned project milestones and the related invoicing), and purchase and sales forecasting tools also feed into the cash flow forecast – the latter using mathematical models to predict, over a longer period, how purchases and sales, and the resulting income and expenses, will develop. The cash flow forecast thus draws on the synergy of all available information about the company’s potential income and expenses.

Summary

In this article we’ve put together an overview of the three most common headaches facing CFOs at mid-size and large companies, and the tools in Microsoft Dynamics 365 that solve them:

1. How to ensure timely reporting of consolidated financial results using consolidation functions and reporting tools.
2. How to expand abroad without extra information-system costs, thanks to built-in legislative support for 36 countries and shared reference data.
3. How to predict the company’s future cash position with Cash Flow Forecasting, drawing on information from the Receivables, Payables, Budgets, Fixed Assets and Projects modules along with sales and purchase forecasting.