4 Financial Consolidation Challenges And How To Resolve Them
There are several financial challenges faced by accounting teams when attempting to create consolidated statements, many of which can be overcome by using an automated financial consolidation solution, such as Corporate Planner.
In this article, we explain the four main financial consolidation challenges and how to resolve them within your process.
1) Inaccurate Data
A consolidated statement is only as good as the data available to the people compiling it. Inaccurate or low-quality data, therefore, is the biggest hurdle in the way of effective financial consolidation. Most data inaccuracies occur because of human error arising from manual consolidation processes, especially if finance and accounting staff depend on spreadsheets to collate and process the data from multiple ERPs and data sources.
By automating your process, you can improve the accuracy of your data by lowering the data input burden on your team, narrowing the opportunities for human error. Financial consolidation software comes with rigorous inbuilt safeguards that detect and flag data anomalies and duplications for fast resolution and enable accounting staff to quickly identify the source of errors – saving valuable time and money on financial reconciliation.
2) Dependence On Manual Processes
Manual data entry is extremely time consuming and – dare we say it – tedious for most people involved. The resource expenditure increases the time and monetary cost of financial consolidation, while the repetitive intensity of the task saps morale and makes human error more likely.
Can specialist financial consolidation software reduce the manual burden of creating statements? Yes. An integrated financial management platform, e.g. Corporate Planner, incorporates a high level of automation, automatically drawing and reconciling data from multiple sources and combining them into accurate statements and reports. This frees your team to focus their time on areas of decision-making that make better use of their skill and experience, improving productivity and output, while reducing the time required to create consolidated statements.
3) Inappropriate Or Inadequate Systems And Tools
Numerous financial planning tools are used by finance teams, from the ERP platform to accounting software and, perhaps too extensively, Microsoft Excel. The biggest challenge that arises from these multi-tool processes is poor integration. Many of these platforms are not good at ‘talking to each other’, which means that they use incompatible file types, and that data is not interchangeable or visible between the tools.
This is why spreadsheets are so commonly used in financial consolidation. Data is exported or physically downloaded from different financial sources and manually consolidated within an Excel spreadsheet. This requirement is wasteful in terms of the time taken to create statements and the duplication of labour, and can also cause issues with collaboration and visibility between remote stakeholders. You can resolve this challenge by investing in an ERP module that specialises in financial consolidation or, better still, by implementing dedicated financial consolidation, planning and forecasting software, such as Corporate Planner. This will enable budget, forecast, and scenario planning consolidation, as well as actuals. It will more likely accommodate better the reporting demands of your organisation.
4) Changing Reporting Requirements
As external factors change or the internal structure of an organisation develops, reporting structures will also change. External factors include not only market trends and economic conditions (for forecast and scenario planning consolidation) but also statutory reporting requirements.. Internal factors may include company acquisitions, mergers, joint ventures , and the implementation of new software systems and processes.
These changes all place a strain on rigid financial consolidation systems that depend on manually updated spreadsheets and data input. The time required to accommodate changes within the system makes the process unwieldy and inefficient. The solution is to establish an agile process with inbuilt scalability and responsiveness, that lets you quickly revise your reporting parameters to comply with current accounting standards, and keep your practices in line with changes in your company and business objectives.
Why Do Financial Consolidation Errors Occur?
Financial consolidation errors result from an organisation increasing in size and complexity, coupled with finance teams using outdated or inadequate tools.
The result is a succession of errors, data inaccuracies, and duplications that can affect your compliance and the accuracy of your statements. An integrated financial planning and forecasting solution ensures that your processes can scale in line with your business as your needs change.
Furthermore, using a purpose-designed consolidation system transforms your statements from a compliance obligation into an active strategic asset, through which stakeholders, investors, and decision-makers can undertake initiatives with a clear understanding of the business’s financial health.
Find Out More
An automated financial consolidation platform, such as Corporate Planner, can help you resolve the financial barriers that stand in the way of creating responsive and accurate consolidated statements. To find out more, or to discuss your outcomes with one of our team, please call +44 1242 578966 today.
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