Benefits of financial consolidation software
Financial consolidation of group results is vital to ensure that the accurate group performance and value can be assessed. Many internal and external stakeholders require the data. Especially as banking loans and covenants may be against the group rather than just a single company.
Many companies faced with financial consolidation of their multiple companies resort to one of three solutions:
- Build an Excel model
- Try and do it in the finance system
- Ask their auditors to do it for them
The ask the auditors may be fine once a year, but it could be an expensive solution if required quarterly / monthly and for forecast data as well.
For simple consolidation and Excel model may be sufficient (but it will be difficult and time consuming to construct). As a company grows and the complexities change an Excel model or finance system will struggle to cope. Just even one of the following could takes days of editing models. Does the financial consolidation model stand up to external scrutiny?
- Partial ownership
- Acquisitions / Sales
- Changing group structures
- Multiple Currencies
- Increased reporting frequencies
- Budget and forecast consolidation
How could a system help?
Financial Consolidation software helps simplify and speed up the entire consolidation process. The software provides clear set up dialogue boxes so that company structures, elimination rules etc are easily defined. With data imported direct from the finance system as much of the eliminations can be processed automatically by the consolidation tool.
Historically financial consolidation software used to be only used by very large multinational groups, who could afford the specialist software and IT resource.
The Corporate Planner financial Consolidation application is for all groups providing an affordable, out of the box, certified consolidation application that can be set up by the accountants. The application can be hosted on premise or in the CP Cloud.
Financial Consolidation Work Flow
Freely Definable Structure
CP – Consolidation provides clear visual structures of group structures. Multiple groups and subgroups can be depicted. The financial consolidation progress for each reporting period is visually displayed on each company. Each consolidation period (and scenario) the group structure can be altered for new acquisitions / sales / ownership changes.
Company chart of accounts are freely definable. In addition there are many editable template structures for IFRS and local GAAP reporting. Users of CP Finance can also use the structures already established as part of the integrated financial planning process.
Financial Consolidation Process
After import of each companies financial statements the financial consolidation steps are carried out. At each stage of the consolidation manual adjustments can be made if required. After each consolidation steps have been carried out intermediate financial statements are automatically prepared. The consolidation steps are:
- Unify Currencies
- Creation of Aggregated financial statements
- Elimination of inter-company investments
- Elimination of inter-company liabilities
- Eliminating inter-company profit / losses
- Calculation of deferred taxes
Out of the Box financial consolidation reports
CP – Consolidation is a complete out of the box financial consolidation tool. There is a complete set of standard report templates included as part of application. This ensures rapid implementation.
- Consolidated Balance Sheet and Consolidated Profit and Loss Account Consolidated Cash Flow Statement
- Reconciliations on all levels
- Complete lists of postings
- Statements of Changes in Fixed Assets and in Equity, Analysis of Provisions, any additional analyses
- Statistical Details
- Participating Interests
- Notes to the Consolidated Financial Statement
- Segment Reports
- Development of Minority Interests
All Reports are exportable to Microsoft Excel, Microsoft Word, PDF
Detailed Company and Segment Reports
The required components of a consolidated financial statement include the Statement of Changes in Fixed Assets and the Statement of Changes in Equity, which are of course provided in CP – Consolidation. Apart from these, however, any number of additional analysis structures can be displayed, so you have an extensive customized reporting system at your disposal. Statistical details, such as staff numbers or lease liabilities, can also be defined for the reporting to be complete.
Capital market-oriented parent companies are required to produce a segment report as a supplementary component of the annual financial statement. In CP Consolidation, segment reporting and statutory consolidation are both processed in one step. To comply with IFRS specifications, segment consolidation takes place on two levels, separated into an intra-segment consolidation and an inter-segment reconciliation.
Scenario as well as Statutory financial consolidation
CP – Consolidation not only produces the statutory financial consolidated returns but it can be used for many more internal reporting purposes.
Prepare company consolidation simulations, changes in group structure companies purchase, sales etc.
Prepare budget and forecast consolidated figures. Lenders and shareholders require more detailed consolidated figures. Not only actual consolidated financial statements can be produced but budget and forecast results can also be generated and compared. Import plan data or use the complete link to CP-Finance the integrated financial planning application ensures rapid consolidation of budget and forecast data all prepared within the single solution.
Complete Corporate Performance Management Solution
CP – Consolidation can be used as a standalone application. In addition CP – Consolidation can be used as part of a wider corporate performance management solution. It directly links with the other Corporate Planner applications, CP – Finance for integrated financial planning and CP – Operative Controlling – for all operational corporate performance management needs.