If you ask any private equity (PE) fund manager what their greatest business challenge is, there is a good chance that most of them will respond with “entity management.” As you can probably attest, entity management can be a tedious, labor-intensive, and downright frustrating process.
There is no question that proper entity management is vital for PE funds, but keeping your entities in check does not have to be a painstaking process that consumes your precious resources and hinders your ability to serve your clients.
Investing in the right tools and technologies will empower your business to overcome common challenges associated with PE entity management, better serve your clients, and accelerate the growth velocity of your business.
What’s Entity Management and Why Does It Matter?
Broadly speaking, entity management is the process of managing various entities, including trusts, limited partnerships, and corporations. It also involves overseeing these organizations’ sensitive documents and critical business information.
Entity management is important for several reasons. First and foremost, proper entity management allows PE fund managers to ensure that all entities meet compliance deadlines, which in turn enables the fund and its entities to avoid incurring any penalties or fines.
Additionally, entity management promotes information transparency and increases organizational visibility. Creating a high level of visibility across an organization allows fund managers to more effectively manage their client’s assets.
Conversely, a lack of effective entity management practices can spell disaster for PE funds. PE firms are tasked with managing diverse portfolios that include a wide range of entities, so if even a seemingly small issue goes unnoticed, it could damage the firm’s reputation and negatively impact a client’s bottom line.
Top Entity Management Pain Points PE Funds Must Overcome
Entity management can be incredibly challenging when PE funds are contending with issues that include the following:
A Lack of Interdepartmental Collaboration
Proper entity management requires accounting, tax, and legal departments to be in alignment with one another. On the same page, these three teams can collaborate to gather relevant documents, prepare files for compliance deadlines, and closely monitor entity performance.
In contrast, when these teams are unaligned, they will struggle to perform even the most routine entity-management-related tasks. For example, suppose that a PE firm’s legal, tax, and accounting departments each rely on disparate software to perform their assigned tasks. In such an instance, the teams may struggle to properly document the relationship between entities or stay prepared for audits and compliance deadlines.
No Single Source of Truth
As PE firms and their portfolio of assets grow, managing entities without a single source of truth becomes increasingly tedious and impractical. It also forces legal, tax, and accounting personnel to waste precious time searching for key pieces of information when preparing documents.
By transitioning to a unified business software platform, PE fund managers can empower their staff to easily access the information they need when they need it. In turn, accounting, tax, and legal teams can devote more of their time and energy toward actually managing entities, not searching for information.
An Overreliance on Disparate Systems
When PE funds use contrasting systems for entity management, inefficiency abounds. Without a singular system for managing investments and investors, it is impossible for PE teams to perform effective due diligence or know-your-customer (KYC) verifications.
Deploying an all-in-one business software solution not only provides the team with a single source of truth, but it also enables the firm to more effectively protect client data. Proactively doing so stands as a critical element of building trust and strengthening the reputation of a fund management firm.
How the Right Technology Can Alleviate These Challenges
The bottom line is this: Entity management is critical for PE funds, but old-school entity management processes simply will not cut it. In such a scenario, the solution can seem unclear.
The only viable answer is to implement an all-in-one business management software, which will enable a PE firm to implement and adhere to uniform entity management practices, therefore facilitating more efficient entity management and promoting data transparency across the firm’s entire portfolio.
Ideally, PE firms should seek out a solution that includes:
Document Automation Tools
Document automation tools streamline the process of creating and sharing important documents with clients. These tools allow PE fund managers to quickly generate and share documents and certificates. Automation tools serve to increase firm productivity and decrease friction.
Entity Creation Capabilities
PE firms are constantly dissolving and creating entities. As such, they need a solution that can streamline this process by providing user-friendly entity creation tools.
Security Mandates
The ideal software solution for entity management will strengthen a firm’s security positioning by including built-in security mandates and sharing permission tools that will enable a firm to more effectively govern the flow of data and protect confidential client information.
Organizational Charts
Organizational (org) charts allow PE fund managers to create visual representations of the organizational structures of each entity. Org charts can also be used to outline the relationship between various entities across a firm’s entire portfolio.
Streamline Entity Management with Athennian
Entity management is critical to the success of a PE firm, and without effective entity management practices in place, a PE firm will never deliver real value for its clients or maximize its productivity.
If your organization wants to streamline its entity management processes and accelerate its growth, you need to deploy Athennian business software, a comprehensive solution that includes everything you need to unify your tax, accounting, and legal teams.
Athennian includes org charts, workflow automation tools, security mandates, entity creation capabilities, and many more implementations. It is a true all-in-one solution that will simplify entity management, help you ensure compliance, and insulate your PE fund from the risks associated with organizational opacity.
If you’re ready to experience Athennian for yourself, we implore you to schedule a demo today. You can also take a product tour and explore Athennian’s suite of entity management tools.
Download the Athennian for Asset Managers Guide
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