What Is Financial Consolidation Software?
Financial consolidation is the process of aggregating financial data from several departments or subsidiaries into a unified set of financial accounts, without sacrificing the integrity or independence of each subsidiary. Consolidation improves visibility and accountability, and makes reporting and forecasting easier and less resource intensive for larger and more complex businesses, and for groups of companies following an acquisition or merger.
How To Create Consolidated Financial Statements
Consolidation literally means joining things together, so the process of creating consolidated financial statements involves organising and uniting diverse data sources into a coherent whole. Tasks involve:
- Importing data from different spreadsheets, reports, and accounting applications
- Mapping general ledgers onto a single chart of accounts
- Including only the relevant groups share of the company’s financial statements, (partial ownership / minority interests etc)
- ‘Normalising’, unifying currencies, eliminating intercompany transactions, to ensure the external trading of the companies accounts is shown
- Producing unified financial statement
Consolidation can be a lengthy and challenging strategy to implement for organisations with multiple sources of truth and different accounting and planning practices across departments. It is more difficult still if sub-groups, part-ownership and multiple currencies are involved as well. There are several inherent risks to the process, including human error, duplication of data, incompatibility between data and file types leading to incomplete statements, and poor integration between platforms affecting visibility and collaboration.
Furthermore, regulatory requirements often dictate how often the finance department must perform financial consolidation, creating time and resource pressures.
Financial Consolidation Software Tools
Financial consolidation software is a tool used by finance managers to facilitate accurate and efficient financial consolidation, while avoiding the pitfalls of the process.
The most commonly used software application is Microsoft Excel, with many businesses using several complex spreadsheets to combine and consolidate trial balance data drawn from various general ledgers. The advantage of this method is that most finance professionals have a good working knowledge of Excel, so consolidation can be carried out without additional capital spent on training, new software systems, and implementation.
However, Excel spreadsheets are vulnerable to duplications and data entry errors, while faulty calculations and formulae can be difficult to identify. This difficulty is compounded when doing financial consolidation because of the strict process steps that need to be followed and any added complications such as sub-groups, part-ownership and multiple currencies.
For these reasons, and because Microsoft Excel does not have any inbuilt tools to facilitate collaboration, many financial experts advise against using Excel for consolidation. There are two alternatives.
1) Some Enterprise Resource Planning (ERP) platforms include financial planning or corporate performance management modules that can aid consolidation, or;
2) You may wish to consider investing in specialist software for financial consolidation. This may be a more efficient and cost-effective approach depending on the complexity of the process, your current software systems, and organisational preferences.
Corporate Planner: The World’s Leading Financial Consolidation Software System
Financial consolidation tools can help businesses plan investments, make better decisions, and sell more products by giving better visibility and control over their value chain. For more information about Corporate Planner, the world’s leading financial consolidation software system, and the benefits of accessing the application through an experienced Gold Partner agency like Account-Ability, please call 01242 578966 today.
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