The Consolidation, Close and Reporting Conundrum - Part 1
November 18, 2021
Copyright 2021 - AMCO Solutions | www.amco.one
By Darshana Sanghavi
Managing Director APAC, AMCO Solutions
The financial consolidation, close and reporting process is one that most organizations continue to struggle with. Is it because the process is complex? Not necessarily. In a typical business, it usually involves the straightforward closure of books for the accounting cycle, collection of financial data, and generating financial statements for internal management and external statutory reporting.
However, increased regulatory compliance and stakeholder demands are exerting pressure on the financial consolidation and reporting process. And the disconnected nature of the process (which is partly supported by spreadsheets and disparate reporting and source systems) makes it problematic for finance to meet the heightened demands.
From our experience working with clients, we find that there are nine areas that typically pose challenges to the CFO and the finance team.
Over reliance on spreadsheets
Many organizations continue to rely on spreadsheets to collect, format and process data that is often extracted from disparate source systems. As it is one of the most common Microsoft Office applications, Excel offers a cost-effective solution in the short term. But this approach is neither sustainable nor scalable in the long term.
Accelerating Financial Close & Reporting
Join the free online webinar on
November 30, 2021 | 15:00 to 16:00 SGT
The data collection and collation process has become quite tedious and time-consuming, even as spreadsheets continue to be the focal point. The issue of laying down audit trails has also become a pressing need.
From our experience working with clients, we find that there are nine areas that typically pose challenges to the CFO and the finance team:
Data collection from multiple source systems
Over reliance on spreadsheets
Multi-GAAP reporting
Disconnected audit trail of data
Complex ownership structures
Currency complexities
Intercompany eliminations
Top level consolidation adjustments
Multiple reporting requirements
Data collection
There are still many organizations in Asia that require the finance function to extract information from multiple source systems that use different format, manually upload data, work with inconsistent mapping definitions, use spreadsheets for reporting and other legacy practices that were fine in the analog era, but not in the digital age.
We recommend to our clients that they implement a solution with ETL (extract–transform–load) capabilities. A unified platform such as OneStream enables:
Integration of source systems with OneStream
Importation of data from disparate source systems, including Excel files
Pre-defined mapping tables that can be shared where required
Data-transformation capabilities such as sign flips (debit vs. credit) and custom calculations
In addition, OneStream has the following benefits:A unified central repository
Consistency in data transformation
Detailed audit trails
Drill-through capabilities from consolidation system to source systems/files
Shortened time for data collection, speeding up the entire close process
For more about OneStream’s ETL capabilities, refer to our blog on Data Quality = Confidence.
The other challenges of using spreadsheets include:
They are error-prone, resulting in data inaccuracies
They have limited version-control capabilities
They have inherent limitations in handling complex computations
There are often broken links and macros
The more complex the workbook, the more checks that are required
Over time, the spreadsheet challenges only become more serious.
Therefore, organizations must work towards moving away from spreadsheets and into investing in technology that leverages from the source systems as much as possible – while enabling the books to be closed in a shorter period of time and in a more error-free manner.
A note of caution: There have been many implementations where the business moves from spreadsheet hell to EPM (enterprise performance management) hell. This can happen when the organization simply replicates the spreadsheet files as they are, robbing itself of the gains that a robust technology platform can bring to the close process.
Learn how one of our customers, a large BFSI, moved away from Excel based planning and implemented OneStream reaping the benefits of having quick and reliable data while maintaining a single version of truth.
Multi-GAAP reporting
Depending on the geographical presence of the group entities, the selected reporting GAAP as well as the stock exchanges where the group is listed, the need to generate consolidated financial statements in IFRS, US GAAP and other GAAPs is a common requirement.
The key challenge is to track how financials have been converted from local GAAP to reporting GAAP. This is a standard requirement which can be easily handled in OneStream. We have implemented it for many of our customers wherein a separate bucket is made available to capture GAAP-related adjustments, along with the flexibility to attach relevant documentation justifying those adjustments.
Disconnected audit trail of data
A lack of connected audit trails is an internal control and efficiency issue, as well as an external audit issue. For finance teams, having a connected audit trail of financial transactions helps speed up any investigation and verification of figures. For external audit, it is an issue when particular transactions cannot be traced properly from source system to point of disclosure.
In addition, having a connected and automated audit trail from recording to reporting (R2R) can be a key productivity tool for the finance organization to improve the consolidation and reporting process. This is especially true given the typical case of a period close where there are often last-minute data changes and journal entries.
OneStream is a preferred choice for customers because of its detailed audit trail capability, ability to drill down to source/calculations, and task management, built-in workflow, close management, confirmation and certification functionalities, as well as approval and rejection processes.
In this blog, we have discussed the first four areas of challenges. We’ll talk about the rest of them in the next blog.
-Darshana
This is the 1st post in a 2-part blog series. Click the link for Part 2