How to Simplify Consolidated Financial Statements
Picture this: It’s financial close time. Your finance team scrambles to gather data from the various business units within the organisation, deals with an overwhelming number of spreadsheets, and creates multiple versions of the same consolidated financial statement to comply with different regulatory bodies.
Sound familiar?
Creating consolidated financial statements, or financials, isn’t an easy task. It comes with numerous challenges, like human error, regulations, and intensive manual labour — often thanks to way too many spreadsheets.
Consolidated financial statements hold a lot of power. At the core, these documents show stakeholders, like your ELT, Board, or investors, whether the company’s future is promising or a bust.
Investing in innovative technology, such as a cloud-based planning and consolidation platform, gives your finance teams the support they need for financials. Eliminate manual tasks, overcome information silos, and ensure compliance while creating these statements, even as the company scales.
Let’s uncover why automation is the future for financial consolidation statements.
Transform the finance consolidation process
Manual reconciliation is the most frustrating aspect of creating consolidated financial statements. If manual input is required, the inevitable human error means there’s a high probability mistakes will happen.
With the elimination of manual work, finance teams can avoid many of the errors we see today. A 2017 study on Business Intelligence in the Consolidation of Financial Statements showed that while spreadsheets can be adequate for a simple consolidation “involving few entities, single-level, and currency,” it’s best to implement “dedicated consolidation software” for a complex business structure.
A robust planning and consolidation platform addresses the challenges of manual processes in creating consolidated financial statements. It automates repetitive tasks, such as data input that overlaps with month-end, quarter-end, and year-end consolidation.
Think about all the various workflows and processes involved in creating financials—the estimation of group holdings and the determination of the value of assets across all subsidiaries, to name a few. There are many steps before you get to the final product, probably burying your finance teams in tons of spreadsheets.
A financial performance management tool like Planful offers automation and updates data in real-time, eliminating the need for manual inputs and reducing human error. The same 2017 study found that implementing a solution for consolidated financial statements resulted in “36% fewer monthly manual adjustments.
Three essential steps to deploy financial process automation
When you decide to deploy a cloud-based solution to automate financial tasks in your organisation, follow these three recommendations adapted from Jeff Machols, VP of the Continuous Improvement Center for Voya Financial.
1. Determine which tasks can be automated.
Tedious tasks that are usually time-consuming are a good fit for financial process automation. Automating eliminations and recurring journal entries (fixed expenses like rent and internet) can speed up the process of consolidation of financial statements. If you need help figuring out which tasks can be automated, look at those that require critical thinking and emotional intelligence and add the most value—assigning staff to these tasks makes more sense.
2. “Pace” implementation.
Once you’ve established which tasks can be automated, set a timeline and strategy. Make the transition to the new system gradual. Spreading the implementation over a longer time will make it easier to manage and help employees ease into the change in the financial consolidation process.
3. Evaluate the effect of automation.
Identify what works best when automated and which areas need improvement, then make adjustments to optimise automation.
In the end, automation won’t just reduce the number of manual tasks; it will also save your finance teams a lot of time in the usually lengthy close process.
Integrate your data for a single source of truth
Consolidated financial statements require data from multiple trial account balances to complete the financial close and reporting process.
Collecting all the data for your consolidated financial statements is a cumbersome and lengthy process, mainly due to siloed entities, ERPs, and inaccessible information.
In a Workiva survey, seven in ten finance professionals said they gather information for close and consolidation from multiple sources, including email, phone, and meetings.
This challenge of non-integrated data spans industries. In a 2021 survey of business and finance leaders, 54% of respondents cited “non-integrated systems as the anticipated biggest challenges facing the finance function” at their organisations this year.
Centralise all your data in one universal dashboard to view numbers across all business divisions in real-time, speeding up the process of creating consolidated financial statements. Some platforms build robust data integration to provide a single source of truth, making the financial consolidation process easier.
Planful integrates with more than 100 source systems, both on-premises and cloud-based, including Acumatica, Sage, Microsoft Dynamics, and SAP, to name a few. Use Planful to centralise multiple data types, from trial balance summary and transaction details to non-financial data such as employee information.
Read more: Data Integration with Planful: Creating a Single Source of Truth.
Keep up with compliance as your company scales
Many finance teams create different versions of the same consolidated financial statement to meet various requirements for multiple regulatory bodies. Dealing with multiple regulations in the financial reporting process is particularly difficult if finance teams do much of the work manually.
Struggling with compliance isn’t limited to business financial statements. According to KMPG, the finance industry faces several regulatory challenges, including “managing the complexities of cross-border regulatory standards” and “using risk data aggregation and reporting for improved enterprise risk management and transparency.”
If ensuring compliance were easy, we wouldn’t see so many compliance-related fines issued in financial services. Case in point: Barclays PLC was fined $34.8 million for not complying with the Financial Conduct Authority’s (FCA) standards.
Meeting regulatory requirements in financial consolidation only gets more complicated as a company scales and has multiple subsidiaries. The solution? A solid financial planning and consolidation platform that supports risk management and can handle the nuances of various accounting systems and multiple currencies.
When you use Planful to consolidate your financial statements, you have access to “presentation-quality financial and regulatory reporting based on a trusted source of financial truth.” Planful automatically creates your regulatory filings, even in multiple jurisdictions. That’s not all — Planful lets you view the origin of financial data and track changes from start to end. You can examine financial data across any consolidation activity and see the “story behind the number.”
How Golden State Foods uses Planful for financial consolidation
Golden State Foods is one of the largest diversified suppliers to the food industry, servicing approximately 125,000 restaurants in more than 60 countries.
After completing a round of acquisitions, Brad Tingey, Golden State Foods’ corporate controller, realised that it was time to consolidate the company’s finances.
The accounting department was using spreadsheets for financial consolidation and reporting, but the spreadsheet approach was no longer appropriate for handling the financial reporting needs of such a large company, so Tingey turned to Planful for a solution.
Golden Gate Foods implemented Planful’s financial performance management (FPM) solution to consolidate reporting across multiple ERP systems and multiple currencies and handled complexities such as intercompany eliminations and minority-owned subsidiaries.
Thanks to Planful, Tingey says that the year-end close process has gone from being long and frustrating to one that is smooth and quick as a result of automation. Data is more accessible, comprehensive, and transparent, and stakeholders receive accurate information faster than ever before.
Accelerate the creation of consolidated financial statements
If your company currently uses spreadsheets for its consolidated financial statements, then you know the struggle of manual reconciliation, data integration, and ensuring compliance—it’s hard, if not impossible, to do this effectively using Excel, but a cloud-based platform can save you much of the difficulty.
The switch from spreadsheets to a modern planning and consolidation platform doesn’t necessarily have to be lengthy.
A cloud-based solution like Planful can be deployed quickly—in three months or less—and works in conjunction with your company’s enterprise resource planning (ERP) tools.
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