Unveiling the Holy Grail of Accounting

In our previous article, we argued that institutional investors, such as family offices, need an accounting solution which enables them to successfully navigate the current macroeconomic backdrop by relying on their own accounting data. Allocators need to always be in control of their entire cost base, as well as of their assets. This is especially true in times of heightened volatility.

When it comes to their accounting needs, family offices need a tool which is transparent, secure, and dynamic. Indeed, there are numerous solutions on the market. However, many of them fall short of one or more of these features. We believe that it is possible to offer family offices an accounting tool which flawlessly combines these three qualities.

At the core of our offering is a trust-and-tested process updated for the modern world: a unified general ledger with continuous accounting features. It is this innovation that makes our accounting offering the right tool for family offices. It enables institutional investors to be in full control of their assets and costs and, in turn, to successfully navigate any market environment.

The Unified General Ledger

A general ledger is the heart of any accounting system. It is the single source of truth for a family office’s accounting, investment, and reporting processes. However, it is not sufficient to have just any general ledger. Most accounting software does not take into account how complex the investment and business needs of family offices can be.

In our recent Family Office Focus report, we collected information about these challenges. One Managing Director from a U.S. multi-family office stated that they “have 85 separate families of different shapes and sizes, and so thousands of legal entities to work with.” Meanwhile, another senior individual at another U.S.-based multi-family office put their figure at around 1,600 entities across 100 client families.

One of the most challenging aspects of running a family office is to efficiently connect portfolio accounting with partnership accounting. Often, the institutional investor would implement a general ledger approach for their partnership accounting but would leave its portfolios outside of that solution. This division creates costly and ineffective manual work needed to reconcile the data generated from the partnerships’ side and portfolio-related information. In other words, the key question – “Where is my money?” – remains unanswered.

An ideal accounting tool stores in one place information from across partnerships with complex entities, as well as from portfolios invested in a variety of assets and in different geographies. This is what we call a unified or integrated general ledger, and it is the only accounting solution that can work for family offices: by bringing in one place portfolio accounting and partnership accounting, the institutional investor has complete control over its money.

In other words, bringing all this information in one place enables the family office to take full control over its assets and cost base. The unified general ledger is the foundation for accurate and timely reporting, improved operational efficiency, and institutional-quality controls.

What is Continuous Accounting?

Simply put, it is accounting in real-time. Many accounting solutions currently available require the period to be closed. This prevents investors from creating timely and necessary reports. Indeed, many family offices do not have ready access to current, aggregated information across all assets and entities.

Waiting for month end or period close to get a financial picture of the preceding month is not unusual. However, this means that you are basing allocation and operational decisions on old data. In the current market environment, dominated by volatility and quick geopolitical changes, this approach can result in huge costs. Continuous accounting solves this issue – completely.

Real-time accounting provides readily available financials by automating and performing all the transactions and (un)realized gain/loss calculations the moment the investor has entered the data. This approach is a gamechanger. Any family office can quickly and securely access necessary information about its entire financial footprint and asset allocation strategies.

“Where is my money?”

Our unified general ledger is fully integrated with portfolio accounting, analysis, and reporting functionality. By bridging partnership accounting and portfolio accounting and by overlaying this approach with continuous accounting, FundCount’s solution delivers a single source of truth without the need to manage data flows and reconciliations between multiple systems, helping family offices to know where their money is at any time.