How to Simplify Consolidated Financial Statements

It’s financial close time. Your finance team’s scrambling to gather data from the various business units within the organization, dealing with an overwhelming number of spreadsheets, and creating 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 such as human error, regulations, and intensive manual labor—often thanks to way too many spreadsheets.

Finding ways to overcome these hurdles is critical since consolidated financial statements hold much power. They show stakeholders if the company’s future is promising or a bust, among other key functions.

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.

Transform the Finance Consolidation Process

Manual reconciliation is the most frustrating aspect of creating consolidated financial statements. Mistakes are likely to occur frequently if there’s a need for manual inputs.

With the elimination of manual work, finance teams can avoid many of the errors we see today. A 2017 study on Business Intelligence in 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 a “dedicated consolidation software” for a complex structure of businesses.

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 planning solution 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.”

When you decide to deploy a cloud-based solution to automate financial tasks in your organization, you can follow the recommendation by Voya Financial’s VP of Continuous Improvement Jeff Machols:

Here are the three essential steps for deploying financial process automation:

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, 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, because spreading the implementation over a longer time will be 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 optimize 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 and ERP’s and information not being accessible. 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 across industries. In a 2021 survey involving business and finance leaders, 54% of respondents cited “non-integrated systems as the anticipated biggest challenges facing the finance function” at the organizations this year.

Centralize 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. Robust data integration is built into some platforms 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 centralize multiple data types, from trial balance summary and transaction details to non-financial data such as employee information. To learn more about Planful’s data-integration capabilities, read our white paper on 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 was easy, we wouldn’t see so many cases of 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. Track changes from start to end. You can examine financial data across any consolidation activity and see the “story behind the number.”

The food manufacturer and distributor Golden State Foods uses Planful for managing compliance. The company has 125,000 restaurants in more than 60 countries. Excel spreadsheets were no longer sufficient for their financial consolidation software needs, so Golden State Foods turned to our platform. Planful consolidated reporting across multiple ERP systems and currencies and handled complexities—such as intercompany eliminations and minority-owned subsidiaries—for Golden State Foods.

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 a lengthy process. 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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