In our previous post, Closing the Books and External Reporting, we went into depth to examine the period-close process as well as addressed various challenges you might come across as you’re closing your books. In this post, we will identify a couple of financial consolidation tools and solutions at your disposal to better equip your accounting team. We will also walkthrough homogenous data.
Financial Consolidation Tools
By far, consolidations represent the most-critical and time-consuming activity for each period close. Large or small, all companies need to be able to quickly gather and combine their operating results. Smaller organizations are sometimes able to achieve this goal leveraging their in-place ERP system, especially if they only have a few locations on a common ERP platform with similar currencies and a single COA. But for most large companies this is not a realistic situation. Multiple versions of ERPs – often due to acquisitions, unique company requirements or staggered ERP rollouts – are almost guaranteed.
A corporate performance management (CPM) solution can play a vital role in such a complex environment by supporting the office of finance’s accounting processes toward the financial close, as well as targeting improvements in management reporting and analysis and external financial reporting and disclosure (Gartner). These applications consolidate the results of single or multiple sources and ultimately help CFOs and other business leaders to gain a clear picture of their financial and organizational performance by ensuring the accuracy of the consolidation for operational and financial information that forms the basis for business decisions.
These solutions are purpose-built for the accounting office and provide some key benefits. The next section will take a look at these in more detail.
Combining operating results from multiple disparate ERPs with different COAs and operational objectives require a critical eye and focus on the ultimate goal of reporting the company results. Consolidating COA values and parent-child relationships, or metadata and hierarchies, is the building block of any consolidation tool. The creation of the common COA/metadata used by the consolidation application must be succinct enough to be manageable, yet flexible enough to meet future business needs as a result of acquisitions and ventures into new markets. Also, the structure should be focused on reporting to external
entities. While management reporting can be an important byproduct, the main objective is external reporting.
Many of the available applications have master data management (MDM) options – a concept that allows you to manage your metadata/COAs in one place for multiple applications. As new accounts or entities are added, you can “push” these updates to your consolidation and/or ERP applications. This provides consistency and mitigates human error in setting up and maintaining your metadata/COA values.
Even without an MDM component, the CPM application can create a robust, common set of metadata/COA that provides corporate consolidations and reporting with a consistent structure and the ability to map additions and acquisitions to the new software quickly. CPM applications can combine disparate data into an easy to understand set of information as depicted below.