Financial consolidation and financial reporting—be it year-end, quarterly, or monthly—usually come with stressors: You have to clamber to collect all the data, ensure your inputs are accurate, and handle the close and consolidation process by the deadline.
The process is still complex and imperfect. As Mary Driscoll, APQC’s senior research director for financial management, said, “[finance department staffs] are soldiers on the front lines. They work through the weekends about five times per year.” Human error, intense manual labor, and excessive spreadsheets are just a few of the challenges that come with Financial Consolidation.
The financial consolidation process has been particularly tough in 2021 as the past fiscal year has been turbulent for many companies, bringing additional strain to their growing concerns.
Whether you’re a pro at the financial consolidation and close process or just getting started in your career, a little proactive planning and the right technology can help you beat much of the stress faced during this time.
Centralize Data and Streamline the Financial Consolidation Process
But in a recent survey by APQC, 54% of respondents (consisting of finance professionals) cite “non-integrated systems” as the second anticipated biggest challenge facing their organizations’ finance function in 2021.
Poor integration of information leads to silos and inaccurate data, making it challenging to course-correct or adjust data in time for a timely close and consolidation.
Workiva also found that “seven in ten [accounting and finance professionals] say one way they wrangle data for the financial close is via email, phone, meetings, or other word-of-mouth methods.” Accuracy is key in financial consolidation, and this method of collecting data is time-consuming and prone to errors.
Centralizing data using a powerful cloud-based enterprise resource planning (ERP) tool gives you the ability to see the status of tasks and changes in data from various departments/sources in one universal dashboard from anywhere in the world—a handy feature when teams are working remotely. A centralized platform holds every individual and department involved in the financial consolidation and close process accountable for any holdups.
Support Cross-Functional Collaboration
Close time varies so much across organizations and industries. The size of the organization, number of departments, industry, and the capacity of the finance team are all factors that affect the monthly close time.
An APQC survey about cycle time for monthly close showed that the bottom 25% required 10 or more calendar days to complete the monthly close process. In comparison, the top 25% could wrap up monthly close in fewer than 4.8 days. The median (50%) organizations needed 6.4 days to perform monthly close.
Cross-functional collaboration is vital to get accurate data inputs from various sources in time for close, as the inancial consolidation process requires obtaining data from multiple departments.
The key to this cross-functional collaboration ismoving away from traditional spreadsheets. Invest in technology that not only centralizes your data, but also enables collaboration between financial and nonfinancial divisions within the company.
Unlike other ERP tools out there, Planful’s financial consolidation software makes financial processes more collaborative. You can assign tasks, add comments, and tag team members within your forecasting, budgeting, and consolidation documents. Most importantly, Planful helps you find a single source of truth to access operational, strategic, and financial data—all in one place, streamlining cross-functional collaboration.
Before switching to Planful, Bickford’s Group Australia ran the risk of “finance becoming a bottleneck,” as it had many diverse businesses that involved a “constant flux of different data in different formats.” The diverse data prevented easy comparison and slowed down analysis and the close process. But, Planful’s easy integration and automation gave Bickford Group Australia the speed and agility they wanted.
“Before, a lot of the data was pulled together by Finance and collated into spreadsheets. Now everyone else does their input and we can focus more on analyzing those numbers rather than just trying to maintain all of the spreadsheets.”
– Ashlee-Louise George, Project Accountant, Bickford’s Group
Automate the Close-to-Disclose Process and Protect Staff Time
According to APQC, “manual processes and a lack of enabling technology” are the anticipated biggest challenge to be faced by business and finance leaders this year, and the challenge extends to financial consolidation as well.
The process of consolidation of financial statements typically involves cutting and pasting from the previous month’s spreadsheets, followed by updating the closing date and time. Finance teams repeat this cycle every month, where data from the current period gets pasted into the previous period, and the current data gets updated accordingly.
This manual data-entry process is prone to error—and burnt-out employees dealing with a frustrating financial consolidation process are even more likely to make mistakes.
Automation helps you maintain accuracy and speed up data input. Investing in the right technology will give you visibility into the close process at all times. With repetitive tasks being automated, you can track real-time progress as various sources input their new data, ensuring transparency and accuracy. According to CFO.com, “almost half (49%) of survey participants said predictive analytics was a top finance technology initiative.” With the right ERP tool, you won’t face the difficulty of making manual updates whenever data changes or needs to be added.
Planful’s financial consolidation and reporting software automates the collection and aggregation of your financial and business data into a single cloud-based platform, simplifying financial consolidation. Quickly establish a baseline, and automate eliminations and recurring journal entries to accelerate consolidated reports.
One of the United States’ largest flatbed trucking firms, PS Logistics, transformed its management and financial reporting using Planful. PS Logistics’ rapid expansion meant their spreadsheet-based reporting method was no longer sustainable. Rather than investing in hiring more talent to reduce close time, the company went with Planful to support automation and increase efficiency.
PS Logistics reduced its monthly close from up to four weeks, to five to seven days. Year-end external auditing that took up to eight weeks is now done in less than a week.
The result? PS Logistics reduced its monthly close from up to four weeks to five to seven days, and year-end external auditing that took up to eight weeks was done in less than a week. Planful saved the company significant time and allowed the finance team to focus on analytics, rather than wasting time on slow, error-prone manual processes.
Simplification of the Financial Consolidation Process Isn’t Limited to Large Businesses
If you think investing in an ERP tool to simplify financial consolidation is only possible for large, multinational organizations, think again. Companies of all sizes invest in ERP tools to cut costs and increase efficiency, which is particularly essential in the financial consolidation process. If you haven’t used an ERP tool yet, consider making the switch to save resources and improve your company’s close cycle time.
Want to learn more? Watch a short, on-demand demo of Planful.