Behind every growing enterprise with multiple entities lies a hidden battle: the struggle to unify disparate financial data. Is your multi-entity business truly seeing its full financial picture, or are vital insights hidden in a maze of disparate systems?
The path to a more efficient consolidation might not always be straightforward. In this article, we will explore some approaches that are guaranteed to help organisations maintain their confidence when managing multiple entities simultaneously, one step at a time.
What is financial consolidation?
It involves combining the financial information of a business’ segments and subsidiaries (such as entities under its control) into a single set of financial statements as though they were a single economic entity.
Consolidated financial statements provide stakeholders with a view of the company as a whole. Specifically:
– Regulators and auditing entities rely on this source to check whether a company is compliant with the rules and regulations it is bound by.
– Investors can rely on consolidated financial statements to assess a company’s situation, i.e., whether that company is winning or losing in its marketplace, and how that company’s operating, financing, and investing activities are being managed.
– High-level managers and executives review consolidated financial statements to evaluate their corporate performance and identify high and low-value-added business segments as well as potential risks and opportunities.
For consolidation purposes, the financial statements of parent companies and their subsidiaries need to be prepared with the same date and uniform accounting policies.
However, the process is not simply adding together all of the assets, liabilities, equity, income, or expenses. This is due to subsidiaries’ transactions being complex and usually requiring adjustments for consolidation.
Read more:Comprehensive Guide to Financial Consolidation: Challenges, Best Practices, & Solutions
Why should companies aim for a more efficient financial consolidation process?
Regulatory compliance
An efficient consolidation process ensures that national and international accounting standards like IFRS and GAAP are followed. A more efficient process also increases transparency into audit trails, standardises reporting formats, and helps businesses avoid unnecessary, costly mistakes, which eventually leads to faster closes.
Read more:Vietnam’s Journey to IFRS: What Financial Leaders Need to Know
Investor insights
Investors and other interested parties require an updated version of the financial information to assess a company’s performance and stability. An efficient consolidated process imparts accurate and up-to-date data to investors as well as internal and external stakeholders, enhancing their trust. It eliminates data inconsistencies among subsidiaries that severely hamper the clear picture of overall financial health.
Management decision-making
Strategic decisions become more effective when financial data is timely consolidated and readily accessible. Management can make faster and more informed decisions about acquisitions, resource shifts, and risk mitigations through access to a unified source of truth, thus accelerating a more future-forward planning process.
Read more:What Leading CFOs Are Doing Differently to Tame Intercompany Transactions?
Transparency
An efficient financial consolidation system reduces fraud risks and false statements because it delivers improved controls alongside transparency and data integrity when all related workflows operate automatically.
Manual reconciliation processes are well-known for producing both mistakes and opportunities for fraudulent actions. A well-structured consolidation process requires standardised charts of accounts and reporting formats together with unified data definitions for every entity, which makes it more challenging to conceal discrepancies or create dishonest entries through uniform data mapping.
Moreover, an efficient consolidation process implements numerous internal security layers that perform checks for both completeness and accuracy alongside compliance verification. The finance team will identify any inaccurate or false information before it reaches the consolidated statements due to this system.
Read more:More Reasons Why You Should Strive for an Efficient Financial Close
Tips for a more efficient financial consolidation process
Standardise global policies
The foundation for successful consolidation is to implement standardised accounting practices that work uniformly across all divisions. Companies achieve standardisation by creating universal procedures that define all steps for collecting, marking, and storing business transactions.
Standardised procedures lower the chance of mistakes and reduce confusion while eliminating duplicated work. Financial reporting teams become faster at producing reports that meet international and national standards when they use precise instructions.
Implement continuous close
The traditional approach to closing accounting books at the end of each period creates additional workload and endless rows of errors, which subsequently prolongs reporting durations.
A continuous close strategy enables organisations to complete their closing work progressively over time. The distribution of workload and faster financial data access led to more precise, timely reporting. The approach encourages ongoing financial cleanliness, so organisations detect and resolve issues at the earliest stages instead of waiting until problems develop.
Enhance reconciliation process clarity
One of the most time-consuming elements of financial consolidation is reconciliation. To streamline this step, organisations should clearly define what a completed reconciliation entails and ensure that these definitions are shared and understood across all entities.
Standardising reconciliation procedures helps enforce consistency, prevents omissions, and improves overall transparency, making it easier to verify balances and resolve discrepancies.
Establish a central intercompany accounting team
Without centralised control, unorganised handling of intercompany transactions will lead to increasing complexity. A specialised cross-functional team, including finance and treasury members as well as compliance staff, can guarantee proper documentation of intercompany activities and system integration. The team takes responsibility for monitoring transaction recording procedures and reconciliation processes to prevent breakdowns in information exchange and duplicate activities.
Leverage automation
Manual processes not only slow down consolidation but also increase the likelihood of human error. Automating repetitive tasks such as data collection, currency conversion, and intercompany eliminations can significantly improve speed and accuracy. Automation tools free up accounting staff to focus on high-value tasks and enable real-time monitoring of the financial close process.
Read more:Don’t Panic! Here’s How You Get Started with Automation
Improve data quality
Accurate financial consolidation relies heavily on high-quality data. Organisations should invest in data management tools and processes that validate, clean, and standardise data across all systems and entities. This ensures that reports are based on complete, consistent, and reliable information, which is essential for strategic decision-making and regulatory compliance.
Enhance audit trails
Robust audit trails create a straightforward way to follow financial data back to its source. The process holds vital importance both for company internal reviews and external audit compliance. The process becomes more transparent and accountable when organisations maintain complete records of all transaction details alongside their changes and approval history during consolidation.
Streamline your financial consolidation process with Infor EPM
Manual consolidation can lead to many problems, such as resource-intensive, slow, and error-prone processes. Infor EPM, provided by TRG International, offers a modern, robust solution that simplifies complex consolidation workflows. Key features include:
Single source of the truth
Infor EPM pulls data from not only within the Finance functions but also other departments across the organisation to create a centralised and unified single source of the truth. By combining all associated transactions onto a single platform, finance teams will gain better visibility and control over all transactions, including intercompany entries. This lessens reporting errors, data duplication, and misunderstandings.
Read more:Experts Explained: Breaking Down Data Walls with Infor EPM
Faster close cycle
Infor EPM’s in-memory analytics platform provides instant data consolidation and immediate feedback. This allows finance teams to process complex multi-layer consolidations and roll-up models faster, thus closing the books more quickly. Nucleus Research, for example, found Infor EPM users experienced 30x faster processing times for roll-up models.
Self-service reporting tools
Infor EPM is built with the end user in mind. It offers a user-friendly user experience for creating and modifying reports without requiring programming or deep technical skills. This empowers finance users to utilise pre-built report templates or flexibly create ad-hoc reports, visualise data, and create dashboards directly by themselves, reducing the over-reliance on IT.
Beyond reporting, users can also customise data entry forms for budgeting and planning, further enhancing the self-service aspect of the entire EPM cycle.
Dynamic and interactive dashboards
One of Infor EPM’s key strengths is its role-based dashboards. Users can create personalised, interactive dashboards specifically for their responsibilities and information needs. From high-level summaries on a dashboard, users can drill down into the underlying transactional details to further investigate and analyse.
Above is just a short list of what Infor EPM is truly capable of. To gain a more rounded look into this comprehensive solution, download our brochure today and discover how Infor EPM can transform not just your finance function but your business!
