From lagging to BRAGging
May 3, 2023
Cross Entity Bank Rec with Xero: From Lagging to BRAGging
It makes perfect sense that a business with a range of services like Immutable would have multiple entities to carry out its operations. As an innovative business, it makes complete sense that they'd use Xero as their accounting system. Unfortunately, the processes they were needing to employ to manage these multiple Xero entities did not make quite so much sense.
Founded in Sydney in 2018, Immutable has become one of the key players in NFT game-development and trading. Their parent company stands strong at the core of the business’s operations, but there are now an additional four subsidiaries in the group. Immutable X is the business’s NFT minting and trading platform, Immutable Ventures is the entity which controls the group’s investments and partnerships, and there are two more entities which are Immutable’s game development studios.
Immutable, the parent co, is the entity from which most payments come, having 25 different bank accounts. The subsidiary entities have 3 or 4 each. With the sheer volume of bank accounts and transactions across the group, it’s inevitable that the subsidiaries' bills often get paid by the parent co. However, reconciling these payments in Xero was an incredibly time-consuming process. There was also the risk that the bills would be paid twice if they were still showing as outstanding in the subsidiary to which they were posted, despite having been paid by the parent co.
For businesses like Immutable, with multiple Xero entities, it is only possible to open one organisation at a time. This means that you can’t compare transactions side by side, or easily flick through a list of bills to identify which ones apply to payments from another entity. This created an extra hurdle for the team at Immutable when it came to reconciling their intragroup transactions.
The Financial Controllership team takes care of Immutable’s accounting work, including balance sheet reconciliation. This team consists of three people, but it almost always falls on Emma to reconcile the intragroup transactions that are made. She had grown accustomed to slogging through this tedious work on a regular basis.
She didn't know that a better future was just around the corner.
As is best practice in accounting, Emma tries to keep on top of Immutable’s bank reconciliation. Xero’s bank feeds, bank rules, and intelligent matching make daily bank rec a realistic and workable standard for single-entity transactions. Unfortunately, the need to cross-check transactions across Immutable’s five entities, and the inability to view them side by side in Xero, added hours to Emma’s workload.
The finance team processes payments on Wednesdays. They had to import manual bank statements for each of the four subsidiaries to show the different transactions which were made by the parent co on their behalf. These statements would normally take until Friday afternoon to come through. Only on Monday of the following week (a whole five days after processing the payments) would the team be able to cross-check the transactions to be able to reconcile them — a cumbersome task in of itself.
Bank reconciliation took hours every single week, so when VP of Finance, Ben Watiwat, learned about BRAG from Mayday’s CEO David Tuck in November of 2022, he was ready to give it a go.
This introduction came at a perfect moment for Immutable, who were midway through the process of onboarding with Airwallex, an international payments solution. Due to the different currencies that Immutable uses for trading, they had to set up 12 accounts in the parent co. To avoid time-consuming intercompany bank rec, it seemed like an additional 12 Airwallex accounts would have to be set up for each of the subsidiaries. This would have amounted to a total of 60 accounts.
Nevertheless, that still seemed to be a simpler solution than the alternative, which would require Emma to manually import bank statements, and endure the back-and-forth account switching in Xero to reconcile the transactions.
Thanks to BRAG it wasn’t necessary for them to set up 48 additional accounts with Airwallex; they could instead use the parent co for all transactions and then reconcile to the relevant subsidiaries.
Following a quick demo where the team were shown how to set up and use BRAG from within the Xero bank rec interface, straight away they started reconciling their payments with the same care-free ease as they used to in their younger, single-entity days.
Now, Emma can reconcile payments as soon as they are processed every Wednesday. This process previously involved a lot of painstaking switching between Xero accounts. It used to take over two hours and was drawn out over several days. It now takes less than half an hour. It is no more difficult or time-consuming than the classic single entity bank rec that finance teams can do with their eyes closed. Over the course of a year, this is a saving of almost 80 hours of Emma’s time.