Financial Consolidation – A modern best practicekylewhitworth
Learning from the past, to navigate changing horizons
Close & Consolidation is a key part of the financial process within a business. For most companies keeping on top of internal and external reporting requirements can be very intense and time consuming. In these times of significant global and business change, everyone is looking for ways to keep their organisation going.
But for companies with multiple lines of business operating in a variety of locations or markets, consolidation introduces complexities that can slow and even delay the financial close. Time is something we do not have the luxury of at the moment, so taking measures to streamline, automate and maximise efficiencies is paramount to business success.
Particularly as we go through these times of significant global change, automating your financial consolidation process becomes a ‘must-do’ when we face challenges like;
- Meeting Digital Transformation objectives – to respond to change in order to stay competitive and in some cases profitable.
- Mergers & acquisitions – requiring the coming together of multiple data sources and systems.
- Groups – Looking to streamline across different businesses and brands.
- Growing pains – companies who have seen significant growth due to an increase in demand for the product/service or as a result of a strategic pivotal move.
- International/Global companies – those needing to streamline processes across borders, currencies and exchange rates, to make significant efficiencies throughout the business.
- Diversifying businesses – those who are expanding to offer new services/products – by organic growth OR acquisition.
- Any company looking to make significant efficiencies of time, resources and deriving valuable insight from their data!
Learning from the past
Neil Whitmore, ACMA, CGMA, MCP & CEO of HAYNE Solutions, says, “I think it is always good to couch the present by referring to recent history, which is how all good extrapolations are made. The past 20 years which happens to align with my personal experience of consolidation solutions, has seen a number of key changes. Such as accounting standards and financial consolidation software solutions.”
IFRS, The accounting standard that shook the world?
Neil continues, “Let’s look at IFRS. Although the change to IFRS caused a huge amount of work for some companies, it is generally regarded as more of a set of principles with more interpretation available than the more rigid rules-based local GAAPs which preceded it. I have personally helped a number of companies adopt IFRS. In the early days, IFRS was a consolidation concept; in other words, most subsidiary books were still kept in local GAAP and Group Finance would make conversion entries to IFRS, leading to Groups experiencing even more complications. Around this time, the consolidation software market boomed, replacing largely Excel-based solutions, although a few early products such as Frango Consolidator, FDC and Falcon were also replaced. Obviously the biggest benefit to the accounting profession was that IFRS is an international standard and therefore makes a comparison of financial statements simpler and more reliable. This in turn aides international Mergers and Acquisitions activity. My advice is to ensure that the financial consolidation software solution you choose can cope with multi-currency leases, and can produce Right of Use journals and export them into your GL system.”
Changes in Consolidation Software
Another big change has been advancements in Financial Consolidation Software and Technology. The past 20 years has seen huge improvements in the areas of technology that deliver Group Finance solutions. Virtualisation, WAN speeds, OLAP cubes, Cloud, multi-factor authentication have all contributed to the solutions we use today.
Neil says, “The above improvements allowed software vendors to bring more speed, functionality and security to consolidation solutions. This has allowed a move away from the ‘Excel Hell’ spreadsheet consolidations and has allowed Improvements in auditability and accountability.
The advent of Cloud technology has added agility and scalability to the provision and maintenance of virtual servers. It has also reduced the total cost of ownership and removed the inevitable need to replace legacy hardware, allowing customers to keep software much longer than previously.
The move to home working following the outbreak of COVID-19 has understandably brought in the general uptake of additional security. All our implementations this year have used Multi-Factor Authentication (MFA). This typically uses codes generated by smartphone apps but can also use physical devices such as tokens.”
Then Vs Now
20 years ago…
The consolidation landscape was made up of ‘home-made’ spreadsheet solutions or forms-based consolidation solutions. Data was either keyed in or uploaded from .csv files. Due to slow networks most solutions could not support remote users and so distributed processing was deployed with complex mirrored regional installations. Reporting was almost always via a simple Excel add-in or via a cumbersome report generator which required a lot of training. Other finance functionality such as planning and business intelligence was offered by other products with little or no interface.
Today’s technology varies considerably from 20 years ago with some key advancements being; Virtualisation and Cloud, transforming the way businesses host, access and use key business systems. They have key features such as; integration with other systems, the ability to interface ledger transactions rather than balances, account reconciliation functionality, double-entry logic for cash flow, write-back to source systems, workflows, audit trail, background consolidation and faster, feature-rich reporting.
Neil comments, “20 years ago if a company wanted planning, consolidation and business intelligence, it would likely have to buy three solutions and integrate them. Sometimes they were from the same vendor but frequently not, which meant led to more work required to use, manage and maintain. Modern solutions offer far more to Group Finance teams than just consolidation and are usually all accessed from a common user interface and built by the same development team. I call this type of solution an umbrella solution. The umbrella finance systems that are now available offer integrated solutions for financial planning and forecasting, cash flow planning, workforce planning, IFRS 16, built-in BI and/or 3rd party tool integrations, disclosure management, account reconciliation…. Oh, and financial consolidation and reporting of course!”
At HAYNE, we see a variety of companies of all sizes, shapes and sectors. Many large companies move so slowly that they tend to change in large steps. Smaller, more dynamic companies can change more quickly and often change is a part of their daily lives.
How do you take steps towards transforming your Financial Consolidation process?
Join Neil Whitmore from HAYNE Solutions on this On-demand webinar: Automating Financial Consolidation – If not now, when? – A Group Finance guide to embracing, adapting and evolving in times of change – where Neil will host a Q&A session talking about why now, is the right time to embrace new technology which will transform your financial processes for the better, forever. You will wonder why you have waited until now to make this significant step towards mass efficiency in the Finance Team.