As the month-end rolls around once again, your Finance Team will be hard at work, undertaking many time-consuming and labour-intensive tasks to consolidate your financial statements. Many companies have long-ago just accepted that this is a simply one of those onerous tasks that require attention and have decided to grin and bear it. That’s a poor decision.
Enlightened businesses on the other hand have realised that there is much to be gained from moving to a built-for-purpose accounting consolidation software application – not least in time saved and improved accuracy of the monthly reported figures.
However, financial consolidation applications have been around a long time now and many were originally designed to be able to connect to larger business applications such as general ledger and ERP systems plus a multitude of others. The technology of the time demanded that data from various systems was handled significantly differently from today's technology. This often represented an accurate, but ultimately resource-heavy solution for IT Departments.
Knowing which financial consolidation software applications still operate using this legacy approach and which now take advantage of far more modern approaches to data connection can mean the difference between a successful project and a failure to deliver your users and business with the benefits promoted by the software vendor. So, let’s take a look and see what you need to be aware of in making your choice of Financial Consolidation and Reporting Software.
Financial Close Processes
Often, a company’s financial close processes are thrown into sharp focus following a business merger or takeover. Processes and technologies are unlikely to be common to both parties and accounting consolidation becomes a priority. Billing, payment methodologies and enterprise-capable ERP technologies all need to be evaluated, selected and operational in a short timescale.
Financial consolidation processes and capabilities can be easily overlooked during this process. Commonly, a decision is taken to ‘do it in Excel’, to ‘save time’ when other IT infrastructures appear to need more attention. That approach is a false economy of course, as attempting to complete all the monthly consolidation processes such as intercompany eliminations, currency conversions, and data validation, while attempting to integrate data from all systems and report as required is a huge task for spreadsheets alone.
Of course, the alternative which may use legacy-style systems also represents a very large drain on resources, so what is the time and cost-saving solution?
Your Close and Consolidation Process
As outlined above, your close and consolidation process can be time-consuming for the Finance Department and can also represent a significant drain on the resources of the IT department. But it doesn’t have to be so, and significant time and cost savings can be made by selecting the right software for your individual requirements and infrastructure.
A software solution can be chosen purely due to the fact that a senior finance team member has previously experience of a particular vendor’s product. This is understandable, but is not recommended. The right solution is the one which provides the greatest ROI for your company’s precise needs and environment. Selecting the best financial close and reporting solutions is not the work of a moment, but will deliver optimal results.
How to Automate Consolidation in Excel
Earlier in this article, we touched on using Excel for financial consolidation. While this is a time-consuming and error-prone approach to a solution, because Excel is so ubiquitous in every organisation, it is often the go-to choice for every task that the Finance Team undertakes. This is not what Excel was designed to do.
As personal productivity tool, Excel has no equal. For financial modelling, it is perfect. But for financial consolidations, it does have serious limitations. Having said that, many organisations do use Excel for precisely this purpose and have spent a lot of time creating effective financial consolidation applications using it. While these applications are effective, they do still demand a lot of time to manage and are very prone to errors.
Having put so much time and energy into a spreadsheet-based system though, many organisations are understandably not keen to simply bin them. Recognising this, in recent years, a fresh approach has been developed by software vendors which recognises this and provides a solution which enables companies to retain hard-won Excel-based applications and quickly migrate the entire system to a managed application which automates previously time-consuming tasks and eliminates errors.
This approach represents a paradigm shift in how we are able to assess the effectiveness of any new accounting consolidation software. Software vendors such as Fluence and Vena Solutions are examples of two vendors who take this approach. Modern, in-memory computing has replaced the legacy batch-processing approach with solutions which are simple and intuitive to use, easy to adapt (for example when a new accounting entity needs to be added), and fast to implement as an enterprise-wide solution.
Group consolidation systems have now become far easier to accomplish. They not only permit an easy way to transform existing Excel-based systems, but also offer an agnostic approach to multiple data sources, enabling new group-wide IT systems to be swiftly integrated into an effective Group Consolidation System.
Choosing the right financial consolidation software can deliver big improvements to your organisation, and not only in terms of your initial and on-going investment. Getting this right allows your finance team to benefit from better processes complementary to financial consolidation, but also with regards to reporting (both statutory and management) and analysis systems which provide better business insights as an absolute minimum.
Modern software will make the process of implementing automated and integrated consolidation systems far easier and represent significant cost efficiencies. Take a look at our Case Study and see how we implemented a modern system for Water Plus.