Is Traditional Thinking Holding Your Finance Team Back?
Robert Kugel, Ventana Research's Executive Director of Business Research, hit the nail on the head when he stated, “The six costliest words in managing a finance department are, ‘we’ve always done it this way.’”
Does that sound all too familiar?
Tradition has often been a double-edged sword. On one hand, established methods provide a familiar framework for navigating the complexities of financial management. On the other, clinging to outdated practices can stifle innovation and efficiency.
This sentiment is at the heart of Ventana Research's analysis report, "Not Your Grandpa's Consolidate and Close Software," which presents a compelling case for embracing modern close & consolidation software solutions in the finance department.
Here, we unpack the essence of this transformation, exploring how modern finance departments can leverage these advancements for greater efficiency and accuracy.
The Evolution of Financial Consolidation
Financial consolidation—the process of combining and summarising financial data from multiple business entities to form a single comprehensive financial statement—has been a cornerstone of financial reporting for decades. Traditionally, this process was manual, labour-intensive, and error-prone, relying heavily on paper spreadsheets, calculators, and sheer manpower. With the advent of computer-based systems in the 1980s, the initial software solutions offered some respite by automating elements of these tasks, yet these systems often remained siloed and heavily dependent on IT departments.
However, as Ventana Research points out, the landscape of financial consolidation has dramatically transformed, especially in the wake of the COVID-19 pandemic. The disruption caused by global lockdowns and the ensuing accountant shortage has intensified the need for resilient, efficient, and flexible technological solutions. Modern consolidation software now offers real-time data integration, enhanced collaboration tools, and features that support a controlled, repeatable closing process.
Modern Challenges, Modern Solutions
The transition from traditional methods to modern solutions is not just about keeping up with technology—it's about addressing the acute challenges today's businesses face, including a shortage of skilled professionals and the need for rapid, accurate financial reporting. However, the adoption rate for consolidation and close software reveals that 40% of midsize and larger organisations employ a dedicated application, while the remaining majority rely on a combination of their ERP system's functionality and spreadsheets for handling consolidations. According to Ventana Research, this trend stems from the relatively static nature of consolidation processes and the minimal enhancements in financial consolidation software over the years. Nevertheless, today's software solutions are designed to do more than just automate; they enhance productivity and control throughout the entire close-consolidate-report cycle.
One of the key features of modern consolidation software is its ability to streamline the entire closing process. Historically, a financial close could drag on for weeks, but with new tools, companies are targeting and achieving much shorter close periods—often within a single business week. This acceleration is made possible by the automation of workflows and the introduction of AI and machine learning, which not only speed up processes but also improve accuracy and compliance with changing accounting standards and tax laws. Kugel highlights the importance of these developments, pointing out that such enhancements are crucial for managing the nuanced requirements of today's financial reporting.
Looking Ahead: AI and Cloud Integration
The current shift towards cloud-based systems is a game-changer. Unlike your legacy, on-premise solutions, cloud platforms can seamlessly integrate updates and new features without disrupting existing operations. This is particularly relevant in an era where artificial intelligence and generative AI are beginning to play significant roles in financial software, enabling deeper insights and predictive analytics without the need for extensive manual input.
Ventana Research predicts that by 2026, half of all midsize and larger organisations will use dedicated close management software to expedite their financial closing processes. This shift is indicative of a broader trend towards digital transformation in finance—a move from static, cumbersome systems to dynamic, integrated solutions that can adapt to the complexities of global business operations.
Embrace The Change
The message here is clear: sticking to the adage "we've always done it this way" is no longer viable in the modern financial landscape. As financial standards and regulations continue to evolve, the technology we use must not only keep pace but also drive improvements in efficiency, accuracy, and strategic foresight. For finance executives, the choice is straightforward - adapt and adopt new technologies or risk falling behind in a competitive and rapidly changing environment.
For organisations still relying on older methods and tools, now is the time to consider how modern consolidation software can transform financial processes, boost productivity, and ensure resilience in the face of future challenges. As the financial sector continues to navigate through complexities, the adoption of advanced, AI-powered consolidation tools isn't just an upgrade - it's a necessity.
Learn more about Anaplan
Discover how Anaplan can revolutionise your financial close and consolidation process. Check them out on the Tech 100!
