Consolidating the Financial Statements? Another Vacation Cancelled!

I have consistently observed that my friends from Finance are working during the times that most others are on vacation. This is especially true during quarter and year ends. Financial Consolidation can get quite complex, and the process of consolidation could be quite manual, even in many large organizations. The CFO’s goal is undoubtedly to push for faster and accurate close cycles. Many of the issues I am listing below are common to most organizations I have had the opportunity to observe and interact with:

  1. The organization has grown through mergers and acquisitions, and the subsidiaries use disparate accounting systems and ERP’s, and thereby have different chart of accounts
  2. Massive co-ordination exercise with the various organizational entities to get data on time for consolidation
  3. Inter-company transaction reconciliation and elimination is a nightmare
  4. Foreign currency translation
  5. Multi-level entity hierarchy makes the consolidation complex
  6. Minority interests and goodwill calculations
  7. Some of the Subsidiaries do not follow Indian GAAP. How to handle the related Multi GAAP reporting (IFRS, US-GAAP, Schedule VI etc) and consolidation challenges?
  8. Lack of consistency between internal MIS and statutory reporting
  9. Lack of traceability for out-of-book adjustments
  10. Compliance is not built into the process, but is a separate overhead activity. This results in going back and doing corrections, rather than getting it right the first time.

Using manual or semi-automated processes to do financial consolidation is tedious and potentially error prone. This makes financial reconciliations, share calculations, foreign currency translations, various allocations and other calculations very difficult to be compiled accurately or be wrapped up within the deadlines.

With Companies Act 2013, the CFO is accountable for certifying internal financial controls. It makes it all the more important to make sure that the processes around financial statement preparation and consolidation are automated.

Many mid-sized organizations face these challenges, but cannot afford to implement large Enterprise Performance Management (EPM) solutions, as they are prohibitively priced. The industry needs easy to use and efficient software solutions that do not burn the bank. A system that is overly complex or does not function effectively will soon be abandoned by stakeholders, and they will go back to their old ways of working.

Once the CFO and senior finance executives get convinced that they have zeroed in on the right software solution for their needs, they need to completely back the program and provide executive sponsorship. Adopting a new software system involves change in internal business processes and change in mindsets. Most people are reluctant to change. Unless the program is driven and monitored by the CFO’s office, it will be one more expensive but failed experiment.

In general, the expectations from the CFO and Finance Heads have been rising steeply. But what frequently stands out as a hurdle is the time and effort it takes to compile necessary information from multiple operational silos within the organization. Besides blocking your time and preventing your team from focusing on value adding work, such labor intensive transactional processes can create serious inefficiencies and inaccuracies in the output.

A simple solution that fits your needs and one that can be easily adopted by the team is what you are looking for. So,I wish you smart decision making – and happy holidaying!!

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