Defining a figure once
A method for group finance when companies keep different ledgers.
A group figure is only as good as the definition beneath it. When companies keep different ledgers and conventions, the same name covers different numbers, and the group total adds figures that mean different things.
This paper is a method for a group CFO or controller. It takes one figure from inventory to upkeep in six steps, and it works with the tools a group already has.
Gross margin is the worked example throughout. The same steps hold for revenue, receivables, headcount and any other figure a board sees.
One name, several figures
Take gross margin at three companies in one group. The first books inbound freight in cost of goods, and the second in overhead. The third books inbound and outbound freight in one account.
Each company’s gross margin is correct by its own rules. Added together, they describe no single business, and a margin that seems to improve may only reflect where freight was booked.
| Difference | Where it hides | Figures it moves |
|---|---|---|
| Inbound freight | Cost of goods at one company, overhead at another | Gross margin |
| Discounts and rebates | Netted from revenue at one company, booked as a cost at another | Revenue and gross margin |
| Revenue timing | On shipment, on invoice or on payment | Revenue and receivables |
| Currency | A monthly average rate, the closing rate or a budget rate | Every figure from a company that keeps its books in another currency |
| Sales between group companies | Kept in each company’s own revenue | Group revenue and gross margin |
| Headcount basis | People or full-time equivalents, with or without contractors | Headcount and cost per head |
Each of these is a reasonable local choice. The group definition decides which choice the group figure follows, and each company’s mapping carries it out.
Inventory
Start with what the group already reports. List each figure that reaches the board, a lender or the owners. Note every place it appears, from the board pack to covenant certificates and the budget.
For each figure, collect how every company computes it today. The evidence is the chart of accounts, the accounting policies and the spreadsheet that produces the number. A person’s memory of them is a lead to confirm.
Ask the person who builds the group pack what they adjust by hand each month. Every manual adjustment is an unwritten definition, and the inventory captures each one.
The result is a short table per figure: where it is reported, who relies on it, and how each company computes it now.
The group definition
Write the definition in words before writing it in accounts. One sentence says what the figure measures and which decision it serves, such as pricing or a lender’s covenant.
Then settle each difference the inventory found, one decision at a time. Record the choice and the reason, because the reason is what settles the next disagreement.
| Decision | Options | One group’s choice |
|---|---|---|
| Inbound freight | In cost of goods, or in overhead | In cost of goods, as part of what the goods cost, with outbound freight in selling costs |
| Discounts and rebates | Netted from revenue, or booked as a cost | Netted from revenue |
| Currency | A monthly average rate, the closing rate or a budget rate | Each month’s average rate for income and costs |
| Sales between group companies | Kept, or eliminated | Eliminated in group totals |
| Ownership | The full figure, or the group’s share | The full figure for each company the group controls, with the share stated beside it |
| Missing data | Shown as missing, or estimated | Shown as missing |
Stay close to the accounting standard the group reports under, and say where the definition departs from it. Name one owner, usually the group CFO, who signs off the definition and every change to it.
Choose a definition every company can produce from its own ledger, or after one small change. A definition the group can only estimate stays a debate.
Company mappings
A mapping says which of a company’s accounts feed each line of the definition. Write one per company, line by line, down to the account numbers.
| Line | First company | Second company | Third company |
|---|---|---|---|
| Revenue | Sales, less discounts | Sales, less rebates moved from overhead | Sales, with sales to other group companies tagged |
| Cost of goods | Cost of goods sold, with freight in | Cost of goods sold, plus freight moved from overhead | Cost of goods sold, plus the shared freight account |
| Gross margin | Revenue less cost of goods | Revenue less cost of goods | Revenue less cost of goods, marked for its freight gap |
Where a ledger cannot separate an item, record the gap. Fix it at the source with a new account or a tag, and mark the figure until a full period is covered.
Eliminate sales between group companies at group level. The seller’s revenue and the buyer’s matching cost leave the total together, and profit still in the buyer’s stock is held back.
A company that changes ledger mid-year needs two mappings and the date between them. A company that must keep its own treatment gets a named exception, written into the definition.
A new company joins the group figure once its mapping is written and checked. Until then, the group total shows it as missing.
The written definition
The definition has two readers: a person preparing the board pack, and an agent that has never seen the group. Write it so both reach the same number from the same page.
Write for a reader who knows accounting and nothing about the group. Spell out every term, use one name for the figure everywhere it appears, and retire the old names.
Keep the page beside the data. An agent reads the description that travels with the dataset, the table it reads a figure from. A definition kept only in a separate manual never reaches it.
The Appendix gives the page as a template, filled in for gross margin.
Checks
Check the definition against figures the group already trusts, for a closed period. Each check either passes or produces a difference someone can explain.
- Map every account in each company’s chart to one line, or mark it excluded
- Bridge each company’s own figure to the definition, one explained adjustment per line
- Rebuild a closed period’s group figure and compare it with the pack sent
- Where an accountant consolidates the group, reconcile to their figures, with eliminations shown
- Ask a person and an agent one question, and check both against the bridge
- Remove one company’s data and confirm the group figure shows it as missing
Upkeep
A definition goes stale the day a company changes something. Review each mapping at every close, and keep the triggers below on the close checklist.
- A new account in any company’s chart of accounts
- A company joining, leaving or changing its ledger
- A change in accounting policy or in the group’s ownership share
- A restatement of a closed period
Change the definition by its owner’s sign-off, with an effective date. Earlier periods keep the definition they were reported under unless the owner restates them, and a restated figure says so. A comparison across periods states which definition each side uses.
Keep anything already sent exactly as sent. A board pack from an earlier month still says what it said after the ledger beneath it changes.
Gatlas
We built Gatlas so a group’s definitions reach the people and agents who read its figures. It reads each company’s ledger and other tools where they are, and each company connects its own through a setup link.
Gatlas defines each figure once for the whole group. Each dataset is written up with what it means and notes on its columns, so your people and your agents read the same write-up.
Every figure traces back to its sources. A missing value shows as missing, and each dataset says when its data was last refreshed. Each reader sees only the companies you grant.
A board pack built in Gatlas as a deck or document can be kept as an edition, a dated copy of the pack. An edition keeps the data it was made from. The product is described at gatlas.ai.
Appendix
| Field | What it holds | Gross margin |
|---|---|---|
| Name | One name, used in every report, spreadsheet and dataset | Gross margin |
| Meaning | What the figure measures and the decision it serves | What each company keeps from its sales after the direct cost of each order, for pricing |
| Formula | The calculation in words, line by line | Revenue net of discounts and rebates, less cost of goods sold |
| Included and excluded | Each item the inventory raised, and where it lands | Inbound freight in cost of goods, outbound freight excluded, rebates netted from revenue, sales between group companies eliminated |
| Basis | Unit, currency, exchange rate and period | Group currency at each month’s average rate, by calendar month |
| Scope | The companies it covers, and the ownership share it uses | Every company the group controls, at the full figure, with the group’s share beside it |
| Mappings | A link to each company’s mapping | One mapping per company, kept with this page |
| Gaps and exceptions | Each known gap and named exception, with its end date | The third company books inbound and outbound freight in one account until it opens a second |
| Missing data | How a company with no data shows in the group figure | Shown as missing in the group total |
| Owner | Who signs off the definition and each change | The group CFO |
| History | Each change, with its date, its reason and the periods it affects | Started with the first close under this definition |
Thank you for reading.