About Salto: Salto's platform helps you and your team deploy, track, and manage your NetSuite customizations effortlessly. Learn more here.

‍

Introduction

Creating a new subsidiary in NetSuite shouldn’t be too problematic, right? To populate the required data in the required form can take less than a minute, but the implications can be far reaching. The subsidiary record touches many different NetSuite objects, and it is important to consider all of them before moving on. Are you using the Subsidiary Navigator tool to view your group structure or temporarily restrict your NetSuite reporting to specific subsidiaries? If not, you should check out the free SuiteApp.

‍

Mistake 1 - Setting the incorrect functional currency

Arguably the most important field on the entire form when setting up a new subsidiary in NetSuite is the “Currency” field.  Once the record is created, the value cannot be changed and there is no workaround. If this is caught before any transactions are recorded in the subsidiary then you can make the subsidiary inactive and create a new one with the correct currency. If, however, this is not caught for a significant period of time you have very limited options. You will be forced to create a new subsidiary (with the correct currency this time) and then decide whether to fix historical financial data retrospectively or prospectively. That decision will differ from business to business.

There are a handful of other fields that cannot be changed after the fact, e.g. “Country” and “Elimination”. Note: “Edition” is derived from the “Country” value, so it cannot be manipulated. If the wrong “Country” is selected, you do still have the ability to manually add the correct nexus for tax purposes after the fact.

So, don’t forget to take your time when confirming and setting the functional currency value on a new NetSuite subsidiary record—one small mistake can cause a significant amount of rework.

‍

‍

Mistake 2 - Not understanding the impact to user roles

NetSuite customers will have their user roles and permissions configured in slightly different ways. One thing that is consistent is the need to review your user roles when you plan to add a new subsidiary to the system.

Some user roles may have “Selected” subsidiaries assigned for user access. It is common to see NetSuite user roles assigned to a specific subset of subsidiaries based upon region, especially where companies have regional finance teams to support the business.

‍

‍

After adding a new subsidiary, you will need to consider whether that subsidiary should be added to roles configured in this manner. For other options, such as “All” or “User Subsidiary”, no action is required.

Taking this one step further, if you are creating a subsidiary in a brand new region—perhaps Brazil in the LATAM region—you may need to create a new role (or multiple roles) that has access to this new region. In this use case it would be best to take an existing role for a different region and make a copy of it; that way the only change to be made on the role is to the subsidiary selection.

Salto Tip: Technically, you should also update the role ID as a best practice—but this is not essential for system functionality.

‍

Mistake 3 - Not considering the impact to existing development

Most objects in NetSuite have some reference to the list of subsidiaries in some way. Suitescripts and workflows are no exception.

‍

‍

Given that some scripts and workflows could be restricted to execute for a specific subset of NetSuite subsidiaries, it is important to consider the impact of adding a new subsidiary and confirming whether existing scripts and workflows need to be updated.

In some cases, you may even need to create a new script parameter, workflow state, entire workflow, etc. depending upon how the originally developed solution was built. Ideally, these custom solutions were built in a (future proof) way that does not require additional maintenance, but that is certainly not always the case.

Salto Tip: For any custom solution that requires subsidiary-specific references, consider placing those references on the subsidiary record itself and make those fields mandatory where appropriate. That way when you create a new subsidiary the system will remind/force you to populate the required references without having to worry about the downstream impact to custom development.

‍

Mistake 4 - Forgetting about consolidated reporting

When you create a new subsidiary in NetSuite, you need to understand whether your Finance team requires the ability to run consolidated financial statements for the new subsidiary and any child subsidiaries below in the hierarchy. In many cases the answer will be no, in which case no further action is required.

However, if consolidated reporting is required, e.g. for a group of companies in a specific region, then it is important that any intercompany transactions within the group are eliminated (removed from reporting) when running consolidated financial statements.

This can be achieved by creating an entirely separate NetSuite subsidiary, an elimination subsidiary, which is designated as such when the “Elimination” checkbox is checked on the subsidiary record. Now when you run the elimination process as part of the month end close process in NetSuite, any intercompany transactions within the group will be automatically eliminated and excluded from the consolidated financial reporting needed by your Finance team.

‍

‍

‍

Mistake 5 - Ignoring reporting segmentation

Another key area I have seen get overlooked is when Administrators forget to review the subsidiary access for other reporting segments, e.g. department, location and class. Some customers may opt to grant access to all departments to all subsidiaries, which makes sense for some organizations. However, location is typically restricted to the related subsidiaries.

When adding a new subsidiary, you may need to update existing reporting segments or create brand new values. For example, if the subsidiary represents your business branching out into a different country/region you should revisit your location segment values to confirm if any new locations need to be added to the list.

Depending upon your system configuration, new subsidiaries may require you to update a significant number of records for user access to those records. In this instance, don’t forget to leverage CSV imports to perform a bulk update. This should be a rare occurrence. If it is happening regularly, you should revisit your reporting segmentation structure as it may require a larger update if the solution is to scale with the business.

‍

Mistake 6 - Lack of communication to end users

Communication is key to any significant NetSuite change and adding a new subsidiary (or multiple) to the system is significant. Users may one day see new subsidiaries in drop down menus and system reporting and not know what to do with information associated with those subsidiaries—should the data be excluded from their reporting?

As such, when adding a new subsidiary it is important for NetSuite Administrators to inform users of the change and remind them that they should take the time to review any existing key reports and saved searches to see if they need to update the criteria. They may need to add the subsidiary, specifically include it, or do nothing at all. Either way, it is important end users are aware and up to speed on new subsidiaries added to the system.

Related to financial reporting, if you have specific formats that you are using then you will need to apply these formats (or create new ones) to the new subsidiary. This will ensure financial reports are presented in the appropriate format for all subsidiaries—those existing previously and the new subsidiary.

‍

Mistake 7 - Not proactively creating new GL accounts

After creating a new subsidiary record, there is almost always a need to create new GL accounts associated with the subsidiary.

Some of the more common accounts would include new bank accounts, credit card accounts, as well as intercompany and equity accounts. The last thing you want is to wait until a busy month end close process to realize you need to create new GL accounts to accommodate bank reconciliations, intercompany reconciliations and running the elimination process. Take the time to do this proactively as part of the subsidiary creation process.

Salto Tip: You don’t need to wait for the subsidiary to be created to create new GL accounts. These can be created in advance and subsidiary access updated once the new subsidiary has been created. Yes, even for bank accounts and credit card accounts the subsidiary can be updated after the fact.

‍

Mistake 8 - Forgetting the importance of group structure

“Parent Subsidiary” is another field that cannot be modified on the subsidiary record once it has been initially saved. This can be updated via a different mechanism that we will review shortly.

Just as it is important to consider whether you need consolidated financial statements for the new subsidiary, it is equally important to understand where the new subsidiary fits into the company group structure, including the appropriate parent subsidiary. If set incorrectly, this can have irreversible impacts to your historic financial reporting.

Now, group reporting structures can change over time. NetSuite has accommodated this requirement and allows users to modify the group structure themselves.

Navigate: Setup > Company > General Preferences > Populate “Allow subsidiary hierarchy to be modified [max: 30 days]

Populate this field with a date within 30 days from now and you will be able to modify the “Parent Subsidiary” field value on an existing subsidiary in the system. NetSuite gives a warning when setting this field value. This warning is important. This system feature should not be used unless absolutely essential.

Salto Tip: Perform this process in your Sandbox environment first to ensure you are comfortable with the financial results before/after the reporting structure change. Validate reporting before making the change in Production.

‍

‍

‍

‍

Best Practices for creating a new NetSuite subsidiary

1. Take the time to select the correct functional currency. Double check. Triple check. Then click save. This value cannot be modified after the fact.
2. Review your existing NetSuite user roles and consider whether new roles are required (if roles created regionally) or whether you need to update existing roles (if specific subsidiary access is granted).
3. Review your existing Suitescripts and determine if any audience updates are required. Do the same for existing workflows by reviewing the condition on the workflow header. If you have subsidiary-specific solutions in your NetSuite environment, you should also consider the need to create new Suitescripts and/or workflows to accommodate.
4. Make sure to consider whether you need consolidated reporting for the new subsidiary added. If you do, then you should create a corresponding elimination entity to ensure accurate consolidated reporting.
5. If you have subsidiary-specific access for key reporting segments, e.g. department/location/class, you should review the existing subsidiary access and update if necessary. Leverage CSV imports to update in bulk.
6. Confirm the need for new GL accounts in your chart of accounts. Does your new subsidiary have any bank accounts? Depending upon your chart of accounts structure, you may need to create new intercompany accounts as well as a new equity account.
7. Your subsidiary “Name” does not need to be the full legal name. In fact, there is a separate “Legal Name” field to capture that. The subsidiary “Name” should be something simple that all users will easily recognize. Ideally something where they can type the first 1 or 2 letters and NetSuite will select the appropriate subsidiary.
8. Consider the need for new fiscal and tax calendars if the new subsidiary is operating under a different fiscal cycle to other subsidiaries in the system, e.g. your existing subsidiaries operate under a December 31 year end, but your new subsidiary has a March 31 year end.
9. Before creating new subsidiaries you need to think about the associated license cost. It can be significant or nothing at all. NetSuite offers subsidiary licenses based upon a combination of country and currency. As such, the same country and currency combination involves no upcharge and you would just need to request additional subsidiary licenses.
10.  Double check the parent entity you set on the new subsidiary. Does this result in the correct group structure? Reporting structures can change over time, so NetSuite does allow you to modify the parent entity selection. Note this will impact historical financial reporting and should not be done lightly without testing in a Sandbox environment first to validate your reporting.

For more information on these best practices, check out Salto’s blog posts that explore some of the things that NetSuite Developers and NetSuite Administrators should consider when working within the NetSuite ecosystem. By following these best practices, you can manage your subsidiary creation process efficiently and effectively.

‍

Final thoughts

The ability to produce automated financial reporting for different legal entities across different regions, currencies, accounting standards, etc. is all powered by the NetSuite subsidiary setup. It is therefore essential that the subsidiary record and all dependent records are updated as part of the subsidiary creation process. If not, you run the risk of causing unwanted system behavior, e.g. system errors that can result in hours of troubleshooting only to find out something small was missed during the subsidiary creation process. Do you have a subsidiary creation checklist? If not, it might be time to start thinking about putting one together.