Consolidations in Dynamics 365 FO
ERP systems have become crucial components for firms and organizations. Nowadays, users demand more functionalities in order to support their business processes. As businesses deal with more complex challenges regarding consolidations, it is important for ERP manufacturers to provide a more encompassing solution to deal with these obstacles. Many firms and organizations use expensive third-party software to complete their consolidations. In this article, we will discuss the capabilities of performing consolidations using the standard out-of-the-box capabilities of D365 FO.
Who should be using this?
Consolidating using D365 is available to everyone who is interested in learning more about the out-of-the-box capabilities that D365 Finance & Operation has to offer. Aside from initial configurations, there are no prerequisites or inherent requirements needed in order to perform consolidations using D365 FO as the options are provided with the system. In recent years, Microsoft has made significant progress improving its home-grown features. This development makes consolidating using D365 FO especially interesting to finance users who want to get the most out of the out-of-the-box capabilities that Microsoft's ERP system has to offer, without resorting to third-party vendors.
Ways to consolidate in D365
D365 offers two ways to perform consolidations, the first one being Financial Reporter (FR) and the second one through Consolidate Online (CO). Microsoft does not prioritize any of these methods, meaning that both have certain use cases where the one is more suited than the other. In other words, there is no clear winner between the two of them. Some organizations will prefer FR over CO and vice versa, whereas others will use both ways in a hybrid setting. Whatever setup you use, the most important thing is that you find a way that works best for you and your organization.
Which tool to use?
As mentioned, although there is no 'best' tool or method to use, both FR as well as CO have different strengths and perform better in certain contexts. To see which tool works best for your organization, we have listed a few scenarios where the strength of each tool is highlighted:
|Scenarios for each of the methods||FR||CO|
|Combining financial data from multiple legal entities in order to consolidate their balances and generate a report based on this outcome (soft)||Yes||Yes|
|Creating a separate entity to store data about specific accounts and dimensions in order to perform consolidations with (hard)||No||Yes|
|Performing consolidations where multiple reporting currencies are involved; details down to transaction level are needed; budget planning or budget control data must be used; or show consolidations by business units; consolidation needs to be visible to all companies while also keeping hierarchy intact||Yes||No|
|Consolidation on multiple levels, each requiring the usage of different currencies||No||Yes|
|The presence of multiple charts of accounts and less than 100% ownership||Yes||Yes|
|Consolidations involving eliminations, and the option to consolidate using different fiscal calendars (important to note: FR does not actually post the eliminations, but only showcases them; there is an extra manual step needed to create a journal entry)||Yes||Yes|
|When there are multiple consolidation phases involving multiple currencies due to organizational requirements and structure (e.g. when all North American companies need to be converted to USD and afterwards to EUR; this requires two consolidation companies)||No||Yes|
Table 1: Overview of scenarios (source: Microsoft: Consolidations and eliminations overview)
D365 also allows users to perform consolidations even when other ERP systems are used. The 'consolidate with import' function can be used to extract data from these systems. As previously stated, both FR and CO have their own unique characteristics. Choosing one of them does not exclude the use of the other; many firms use both in conjunction to get the best of both worlds.
Benefits of each method
Both tools provide their own distinctive set of advantages, but they also have many that overlap. Consolidating using either method allows organizations to have dynamic consolidation capabilities. Performing consolidations (after configuring the necessary setups) is always just one click away. The reports that are generated by consolidating through FR and CO provide rich data which helps your organization have a better control over the consolidation process. The way eliminations are handled is different for each tool, but regardless of which tool you go for, you can expect that both ways will have the desired outcome. And after everything is said and done, the audit capabilities that both methods provide will ensure that your organization is never faced with surprises.
Interested in learning more?
KPMG Microsoft is a dedicated team of Microsoft experts who have years of experience in Microsoft technologies and finance. We can provide advice to optimize your consolidation and Microsoft tooling to become mature as an organization in consolidation. If you want to sit down and discuss the capabilities of consolidating within D365, feel free to reach out to us.