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Subsequently, manual reconciliation not only prolongs the consolidation’s final phase, but also increases the finance professionals’ workload, making the entire consolidation process both ineffective and low quality.
What’s more, for businesses to thrive, they need clean books. Legacy financial systems are outdated and messy. They add another layer to the already onerous burden that CFOs and the finance functions are bearing. Actionable data are essential for managers to make informed managers. Therefore, it is an excellent reason to clean up accounting records.
Historical data (such as goodwill, investment, profit from the sale of fixed assets, etc.) should be eliminated after a specific time. In each reporting period, CFOs should make adjustment and elimination of historical transactions accordingly.
2. Low-quality data
In essence, financial consolidation is the process of collecting information from all entities and grouping it in one set of financial statements that empower the C-suite to make strategic decisions.
As information streams in from disparate, multiple sources, it takes time to compile. If there are concerns or questions regarding the data, it will extend the time taken to complete the report.
If an entity uses a different currency from the parent company, the finance team typically has to conduct an extra step of converting it. This step is not that big of a deal but certainly is cumbersome.
Imagine if the staff in charge forgets to update the exchange rate, or that the parent company does not re-check the dollar amount and continue to input the local currency base into the final report, the results will be a world of difference.
3. Changing reporting requirements
Statutory requirements and compliance regulations are constantly changing and getting more complex. They are coming from not only the government but also within the industry.
These changes should also be reflected in the reporting process, which can also mean the existing financial consolidation reporting process turns disarray, and therefore, requires finance personnel to input information manually.
Also, the consolidation process of multiple entities calls for reformatting results and further spreadsheet manipulations.
Auditors and reporting teams are in increased pressure of ensuring the financial reports stay complied to the latest regulations and compliance. Ensuring risks are identified as soon as possible is not an easy task.
4. Data manipulation
Spreadsheets offer a simple look and feel, and everybody can edit them. The freedom to alter almost anything in spreadsheets is the root cause of multiple frauds and data manipulation which has happened countless times in the past, and even today.
Furthermore, consolidated financial statements do not always display the true financial health and situation of the business entities. The parent company often overlooks reports from the entities as they are only included in the notes section of the consolidated statements, which makes it easy for these subsidiaries to manipulate data to mask their problems and liabilities.
How can software help?
All of the above issues can be resolved with the right financial management software. The solution stores all information in one single repository and allows the consolidating and reporting processes to occur in real-time, eliminating the prolonged waiting time sending data back-and-forth.
Advanced financial management software also allows instant access to quality insights, which can significantly increase visibility. For example, mergers and acquisitions within the fiscal year can be easily added into the system to reflect the business’ current financial position accurately or to ensure the continuity of the year-to-year forecast.
Advanced financial management software also comes with pre-built reporting templates according to international and local standards to save the finance team’s time for more value-added tasks.
Cloud-based solutions also integrate with a social collaboration platform to enable communication across the entire group, enable businesses to safely collect, update, validate, and compare data for timely report adjustments.
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