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Fund Accounting At the Abyss

The expanding universe of alternative investments is accelerating the use of investment partnerships and the need for Fund/Partnership accounting within the Family Office. Traditionally, recording data for a fund or partnership and then tracking and reporting on it, starts small and is managed by someone like the office CFO using spreadsheets.  However, the inevitable and incremental growth in the use of this investment type has caused the spreadsheet model to grow in complexity. This has brought to the forefront the inherent limitations of using the spreadsheet model. Spreadsheets, as we know them, have two key limitations. First, they can be the source of mistakes and result in huge error rates. Secondly, they can cause major problems when it comes to audit and compliance concerns. Spreadsheets give the user a lot of flexibility, for example, with allocations. However, all the knowledge about how the spreadsheet model works is typically in an individual’s head and the lack of transparency and the degree of risk makes this model unsustainable. This way of working is now teetering on the edge of the abyss and must change to include systems integration, controls, and best practices so that Fund/Partnership accounting in a family office can be implicitly trusted. It starts by looking at the tools the hard-working staff at a Family Office have at their disposal. The use of spreadsheets and the associated manual processes should be replaced by a state-of-the-art accounting and reporting platform to enable every type of Fund/Partnership to be administered more efficiently, accurately, with less risk, with more security and built-in transparency.

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An opportunity for real integration of technology and operations in the SFO and MFO world can be revolutionary and can positively impact the family office business model. It can make the complex simple. Technology no longer needs to reside in its own silo and its potential to impact operations can be exponential when the right tool is used. It can be a critical lever for supporting operations staff and in adding value and in increasing quality. The impact of technology can be employed across nearly all operational functions, providing the opportunity to manage family office complexity and costs. What does it look like and how can family offices rapidly implement a technology that can really make an impact?

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