As organisations grow through acquisition, restructuring or international expansion, their financial entity structures can quickly become more complex.
What may begin as a relatively straightforward group structure can develop into multiple subsidiaries, different ownership vehicles, different accounting systems, currencies, reporting requirements and intercompany relationships.
For Group Finance, the challenge is not simply managing more entities. It is maintaining control, consistency and visibility across the group, while continuing to deliver accurate reporting within increasingly demanding timescales.
When complexity starts to affect the financial close
Different entities within the same organisation may operate separate general ledgers, charts of accounts and reporting processes.
This can leave Group Finance spending significant amounts of time collecting, validating and reconciling information before consolidation can even begin.
The challenge becomes greater when the process relies heavily on spreadsheets and manual adjustments. Finance teams may find themselves managing:
- Data from multiple ERP and accounting systems
- Different charts of accounts and reporting structures
- Intercompany balances and eliminations
- Multiple currencies and translation requirements
- Acquisitions, disposals and changes to group structures
- Different statutory and management reporting requirements
These processes can work, but as the organisation becomes more complex, they become increasingly difficult to manage efficiently and consistently.
Intercompany reconciliation remains a major challenge
Intercompany reconciliation is often one of the most time-consuming areas of multi-entity consolidation.
In principle, transactions between entities should match. In practice, timing differences, inconsistent coding, currency movements and different processes across subsidiaries can all create discrepancies.
Where reconciliation is predominantly manual, Group Finance can spend valuable time investigating differences rather than reviewing and analysing results.
A more controlled approach allows intercompany balances to be identified and matched earlier in the close, with exceptions highlighted for investigation.
Automating elimination rules can also reduce the volume of manual journals required during consolidation and create a clearer audit trail of how consolidated figures have been produced.
Creating a single version of the truth
Technology has an important role to play, but implementing a consolidation platform is not simply about replacing spreadsheets.
The wider objective should be to establish a consistent financial reporting framework across the organisation.
An effective consolidation environment should enable finance teams to bring information together from different source systems, apply consistent accounting rules and maintain visibility from consolidated results back to the underlying data.
This can help organisations improve:
- Financial close and consolidation
- Intercompany reconciliation
- Currency translation
- Management and statutory reporting
- Auditability and financial controls
- Visibility across entities, regions and business units
Importantly, the technology also needs to accommodate change.
Acquisitions, disposals, reorganisations and evolving reporting requirements are part of operating within a complex group. Finance systems and processes therefore need to be flexible enough to support these changes without creating significant additional manual work.
Building a more scalable consolidation process
For organisations reviewing their approach, the starting point should be understanding where complexity currently exists.
Which activities require the greatest manual effort? Where do reconciliation issues repeatedly occur? How easily can figures be traced back to source information? And how straightforward is it to accommodate changes to the group structure?
Answering these questions can help identify whether existing processes remain appropriate for the organisation or whether greater automation and control are required.
At HAYNE Solutions, we work with Group Finance teams to improve financial close, consolidation and reporting processes using technologies including IBM Controller and CCH Tagetik.
Our focus is not simply on implementing technology, but on understanding how finance operates today and creating processes that are controlled, auditable and able to support the organisation as it evolves.
If increasing entity complexity is making your financial close and consolidation process harder to manage, speak to HAYNE Solutions about how we can help.
