Financial consolidation can be an incredibly time-consuming process, requiring hours of labor across multiple departments. Find out which three practical steps you can take to increase efficiency and take control of your consolidation process.
Why is financial consolidation still a challenge?
Financial consolidation is an essential step in the monthly closing process of any multi-entity organization. Its complexity and the related challenges make it difficult for Finance departments to cross the finish line in time. Whenever subsidiaries use different source systems and non-standardized processes, the organization will struggle to efficiently execute the respective steps, thereby delaying the delivery of actionable insights into its group-wide performance. Automating the financial consolidation processes using suitable solutions can help address those challenges.
The biggest challenges of financial consolidation
Despite many technological advancements in the past decades, the financial consolidation process is often still labor-intensive, time-consuming and dependent on solutions outside of an organization’s core ERP environment (e.g. Excel). As companies grow, the complexity of the process tends to increase. The biggest challenges that make financial consolidation such burden for Finance departments are:
- The use of auxiliary tools: spreadsheets are widely used by Finance professionals, as they offer flexibility and ease of working in an isolated environment. However, they were not designed to support complex processes across multiple entities
- High volume of manual work and low level of process automation, which subsequently leads to low quality and inaccurate data
- The need for late adjustments of intercompany transactions
- Constantly evolving reporting requirements, both for external reporting and management reporting
- Differing accounting regulations in various jurisdictions
- Different ERP systems between subsidiaries increase the level of complexity of the process
The key steps of financial consolidation
At its simplest level, the process follows below key steps:
Using EPM Solutions for best-in-class financial consolidation
There is a wide variety of consolidation / EPM (Enterprise Performance Management) solutions available. Does your organization experience consolidation to be a challenge? There is significant improvement potential to be realized by investing in your EPM solution and consolidation process. This can be done by either improving the configuration of your existing solution and processes or by replacing an outdated solution by a best-in-breed EPM solution that fits your specific requirements.
Best-in-class EPM solutions offer a variety of benefits:
- Use of spreadsheets becomes redundant, thanks to automated workflows, pre-defined (embedded) templates and automated data feeds
- Granular insight into the consolidation progress in interactive dashboards, enabling targeted follow-up in case of bottlenecks
- Reduction of manual work volume by automating steps like currency conversions or intercompany reconciliations
- Decrease of the number of last-minute adjustments at group level by implementing automatic controls and validations in the consolidation process
- Reduction of the number of manual adjustments and potential errors by making use of standard connectors with ERP systems
- Acceleration of the year-end closing process with fully automated features for disclosures and currency conversion
Investing in an adequate EPM solution will offer more control over the consolidation process. It will provide higher-quality insights for decision-making while – most importantly – the associated efficiency improvements free up capacity for Finance to focus on strategic and impactful activities. Now the key question is, where do you start with improving your financial consolidation process. The steps below provide some practical actions that you can take immediately.