Introduction

NetSuite’s out of the box functionality to support business financial reporting is solid, but for companies that operate across many jurisdictions, countries or deal with M&A, there is often a need to go deeper and support a much broader set of reporting requirements.

To support growing companies with these requirements, NetSuite offers a solution that allows users to run financial reports in a more dynamic way. In this blog post we are going to explore NetSuite Multi-Book Accounting and why you should be using it to support your business as it evolves on its journey and reporting requirements inevitably grow in complexity over time.

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What is NetSuite Multi-Book Accounting?

NetSuite Multi-Book Accounting is a feature available in NetSuite OneWorld, designed to support businesses managing multiple sets of accounting books under a single platform. It allows a business to manage and maintain financial reports that are compliant with different accounting standards and regulations, across multiple subsidiaries.

Once enabled, you will be able to create separate accounting books, with the ability to reflect different accounting rules, currencies, chart of accounts, taxation, etc. This is not your typical NetSuite customization - it is truly transformational.

That said, before enabling the functionality you first need to consider whether you need the full Multi-Book accounting solution or if adjustment only books will be sufficient. You will always have a “Primary” Accounting Book that NetSuite reports financial results on. Depending upon the Multi-Book Accounting solution you adopt, you will have adjustment-only books or secondary books.

Let’s explore some of the key differences.

Differences between full multi-book accounting and adjustment-only books

Implementation

NetSuite Administrators are able to implement adjustment only books in a OneWorld account using out of the box functionality. In order to implement full Multi-Book Accounting you will need the assistance of NetSuite Professional Services or a Multi-Book authorized partner - this cannot be implemented in-house. NetSuite recommends this level of support when setting up adjustment-only books, even though it is not required.

Adjustment-only accounting books

Here are some of the key things to remember before implementing adjustment-only books:

1. They do not duplicate the data from the Primary Book, they only allow adjustments that overlay on top of the Primary Book financials.
2. You can have multiple adjustment-only books. They do not count against your accounting book limit (5 active accounting books including the Primary Book).
3. Significantly easier to implement and require less data maintenance as the data is not duplicated. This functionality can be setup in a short amount of time.
4. You must use the same functional currency as that set in the Primary Book. E.g. if a subsidiary is setup with a USD functional currency in the Primary Book, all adjustment-only books must use a USD functional currency for that same subsidiary.
5. You must use the same effective (accounting period) as that set in the Primary Book.
6. They support separate depreciation methods in the NetSuite Fixed Asset Module.
7. You are able to create separate prepaid amortization entries, but only from book-specific journal entries i.e. not from vendor bills nor vendor credits.
8. You are able to create separate revenue recognition arrangements and elements, but only from book-specific journal entries i.e. not from sales orders, invoices, etc.

Full Multi-Book Accounting (secondary accounting books)

Consider these things before jumping into a full Multi-Book Accounting implementation:

1. For the initial implementation, a process is executed (Historical Transaction Processing “HTP”) to copy the transactional details from the primary book to a secondary book. The transactions themselves are not duplicated, but the GL impact of those transactions are duplicated and copied to the secondary book.
2. Despite the 5 accounting book limit, typically only one or two additional accounting books are required in addition to the primary book, so the limit should not pose a problem.
3. Implementing full Multi-Book Accounting is significantly more complex. Not only for the system configuration and setup required, but also for the data validation that needs to be performed on the secondary book financials. Be prepared, even with NetSuite’s support, this is a process and not something that can be stood up in a day.
4. Allows you to setup financial reporting for different functional currencies e.g. a UK subsidiary with USD functional currency in the primary set of books can have a functional currency of GBP in a secondary set of books (or any other currency enabled in your NetSuite environment).
5. As for adjustment-only books, separate depreciation methods are supported in the NetSuite Fixed Asset Module.
6. You are able to create separate prepaid amortization entries from source transactions, such as vendor bills and vendor credits.
7. You are able to create separate revenue recognition arrangements and elements from source transactions, such as sales orders, invoices, etc. this includes separate revenue recognition rules e.g. ASC605 vs ASC606.

Salto Tip: When working with prepaid amortization entries from vendors bills and credits, always double check the amortization schedules. Secondary book amortization schedules will default to align with the primary book and need to be updated manually (if required).

How to implement adjustment-only books

As previously mentioned, implementing full Multi-Book Accounting requires the support of NetSuite Professional Services or a Multi-Book authorized partner, so we are going to focus on the configuration of adjustment-only books here.

To enable this functionality, navigate:

Setup -> Company -> Enable Features -> Accounting -> Multi-Book Accounting -> Check “Adjustment Only Books”

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Once enabled, you can now create an adjustment-only book. Navigate:

Setup -> Accounting -> Multi-Book Accounting -> Accounting Books -> New

Now give your adjustment-only book a name, select subsidiaries and whether consolidation should be enabled for this particular book or not. Notice that the “Base Book” field is a list type field. Yes, you can create adjustment-only books based upon other secondary accounting books (if you have implemented full Multi-Book Accounting already), but typically will be tied to the primary book.

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The status for each subsidiary is “Pending”, which is the system default for existing and new subsidiaries created. Updating the status to “Active” is an important step when implement full “Multi-Book Accounting” as it is required in order to post book generic transactions to the accounting book i.e. if a subsidiary has a “Pending” status for accounting book A and a vendor bill is posted to that subsidiary, the GL impact of that transaction will not be posted to accounting book A, resulting in a mismatch of GL data between the books. This must be avoided.

In truth, this is not as critical for adjustment-only books as NetSuite does not duplicate the transactional data.

In the future, once the purpose of the separate accounting book has run its course you are able to update the status to “Inactive” to make the financial data read-only for that subsidiary/accounting book combination.

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Why should you be using it?

Now that you know what Multi-Book Accounting is and how to implement adjustment-only books, you might already be considering application for it in your own business. If not, I want to share some of the more common use cases I have come across.

Example 1 - Local statutory reporting requirements

Do you ever find yourself taking NetSuite financial data offline and making adjustments in Excel? It’s pretty common and in some cases required in order to support the preparation of financial reporting that meets local statutory reporting requirements.

You may need to convert financial data from one functional currency to another, make local GAAP adjustments to account for differing accounting treatments or perhaps both. In any case, these adjustments can be made offline, but the process is manual and difficult to track - you can’t approve a journal entry in Excel!

Also consider the following fiscal year when you need to run the manual process again, as well as take into account the adjustments made in prior fiscal years. It can be difficult to manage and maintain outside of NetSuite.

So if you’re doing this today, think about whether NetSuite Multi-Book Accounting can ease this administrative burden. You might be surprised!

Example 2 - Local tax filing requirements

How are you managing your local tax filings today? Whether corporate tax or indirect tax, NetSuite Multi-Book Accounting can support these tax requirements.

A good example is VAT Return filing. Perhaps you have a subsidiary in the UK that has been setup with a functional currency of USD, but need to report your VAT Return in GBP. To do this manually would require a system export and conversion of the data, which is very manual. Not only that, certain jurisdictions require filing of returns directly from accounting software, making this particular use case even more challenging.

With full Multi-Book Accounting, you can create a secondary book and set the UK subsidiary up with a functional currency of GBP. You would then report these numbers on the VAT Return filing, as they would have already been converted to GBP (where necessary) by NetSuite.

Thinking about other forms of tax, you have the ability to stand up a tax set of books. In other words, an accounting book that processes adjustments such as depreciation to comply with tax standards as opposed to accounting standards. You can have your consolidated GAAP, local GAAP and tax accounting books all managed and maintained in a single system. Imagine the amount of time this could save on tax preparation in addition to the time saved for the indirect tax use case we explored.

Example 3 - Mergers and acquisitions

Has your company been involved in any merger or acquisition related activity? Even if the answer is no, are you prepared for when this could happen in the future?

M&A activities can have significant financial repercussions. As a result, it is required to prepare the financial records to account for both pre and post acquisition financial positions. Perhaps you only need to account for the post acquisition financial data in your consolidated financials, but still want to keep track of the pre acquisition financial data inside NetSuite. How can this be achieved if the pre acquisition financial data should not be part of historic consolidated financials?

This is a great use case for an adjustment-only book. You would setup the new subsidiary for managing the post acquisition in your primary book, then create an adjustment-only book to account for the account periods pre acquisition. The adjustment-only book data would not impact the historic consolidated financials, but still allows you to maintain this data within NetSuite for ease of reporting.

Example 4 - Scenario planning

Scenario planning is typically managed with a planning and budgeting solution, but what if your business does not leverage one of those tools? There would be nothing stopping you from using an adjustment-only book to serve this purpose.

If you need to see the impact to financials for a specific transaction (M&A perhaps), you could record the transaction(s) via book-specific journal entry to the adjustment-only book, then run a report to compare with the primary book.

Making changes to the scenario assumptions would be manual. Not ideal, but if this is a one-off analysis and/or you do not have access to a planning and budgeting solution, this might be the next best option and it is included with your NetSuite OneWorld subscription.

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Useful references for NetSuite Multi-Book Accounting

• Multi-Book Accounting Overview
• Using Multi-Book Accounting
• Adjustment-Only Books Overview

For more information on NetSuite features you should be using, check out Salto’s blog posts that explore some of the things that NetSuite Developers and NetSuite Administrators should be leveraging within the NetSuite ecosystem.

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Final thoughts

Overall NetSuite multi-book accounting is a powerful reporting tool that will support your business on it’s journey through international expansion, M&A or any other reporting challenges it needs to work through.

Having the ability to quickly stand up an adjustment only book internally is very helpful. Within a few minutes you can be up and running. Unfortunately, to work with the full Multi-Book accounting functionality it does require partnership with NetSuite or a certified partner to implement. There are certainly more moving parts to consider when implementing the full Multi-Book accounting solution, so a business should not take this decision lightly, both from a cost and timing perspective. That being said, once the system has been configured it is far more powerful when compared to the adjustment only book functionality for the reasons outlined above.

If you are working with NetSuite OneWorld and you’re not using NetSuite Multi-Book Accounting today - it might be time to start!