Financial Consolidation - A Challenge Solved
Financial Consolidation of Accounts for statutory and internal MIS has been always a challenge for the Finance team in any company.
Today’s corporate financial officers are held to higher standards of accountability than ever before, even as their businesses grow more complex and stakeholders demand faster access to accurate financial results. Finance Executives like accountants and CFO’s are facing increased pressures related to financial consolidation of accounting based on companies, business areas, profit centers, divisions or branches, or the SBU’s of internal cost accounting. Now that the statutory consolidation reporting which requires that the reported data to be aggregated into consolidated financial statements is needed to be submitted on a quarterly basis is becoming a challenge. The requirements of a financial regulatory statement are significantly high. The timelines expectation to deliver is decreasing and manpower expense required to complete their timely submission is ever increasing. The reconciliation of a company’s financial accounting systems significantly requires skilled manpower and experience to complete the task.
Today organizations need is to quickly collect data from operating units around the world, even when these locations have disparate general ledger systems, charts of accounts, and ERP systems. Data needs to be consolidated in line with local and international requirements, such as GAAP, Sarbanes-Oxley, and IFRS, and is stored in a single database, ensuring that everyone works with the same set of numbers, accessing data from software rather than a spreadsheet. Any changes are made in this central location, resulting in greater control and confidence in the numbers. Data can be compared with budgets, plans, and forecasts within software, which improves business insight. It should have detailed journal and audit capabilities to provide consolidated financial reporting transparency to satisfy both internal and external auditors alike.
Often the accountants struggle for weeks to consolidate multiple levels in their organization using their ERP. Adjusting entries are booked in ERP and need to be replicated multiple times for each level. Inter-company eliminations cause delays while the accountants reconcile the differences between the companies using spreadsheets. The spreadsheets are fragile and only one person in the company is entrusted with them. But even that person breaks into a sweat when there is reorganization and the consolidation spreadsheets need to be redone. There are lots of links between all the spreadsheets and one change could cause cascading errors in unsuspected places. ERP comes with a reporting toolset and predefined set of reports with general purpose query tools to generate reports with data within ERP database. These tools are difficult and confusing to use and rely on IT team to deliver the on demand report which will take time where only thing that matters user is answer question of the moment.
MAIA Intelligence is working on this software product named 1KEY FCM (Financial Consolidation Management) Model to solve all the challenges mentioned above. 1KEY FCM Model will eliminate the potential for errors and reduce time spent on repetitive manual processes with its multicurrency capabilities, automated calculations and adjustments, and other features that address accounting and regulatory issues. 1KEY FCM Model combines the power to unify all legal and management financial reporting needs with the agility to blend corporate control with local flexibility.
Posted on June 27th, 2008 by Ashwin Dedhia
Filed under: Business Intelligence, Emerging Trends
The issue of consolidation is really a major one. We have experienced similar issues with many of our clients. Our Audit team faces challenges in re-conciling and identifying the final copy of the Excel files from where the data is consolidated.
It’s a great to know that technology tools can be developed for such issues also. Kindly send us a copy for review after your project is deployed at some customer location.