Depending on their situation and strategies, companies approach the financial consolidation process in different ways. It is important that businesses thoroughly understand their choices so as to achieve an efficient financial close. The main approaches, some of which may be combined, are discussed below.
The most common approach involves the use of spreadsheets to manually process and consolidate data exported from disparate financial systems.
- It is the fastest and cheapest solution in the short-term
- Familiar user-interface
- High chance of administrative errors resulting in inaccuracy of data
- Issues with version control
- More time and money spent on the close in the long run
Using ERP systems
Companies taking this approach want to use the general ledger component of their existing ERP system. For this approach to be viable, businesses need to make minor modifications that allow their current ERP general ledger to be used as the common financial consolidation platform (e.g., standardising on a single vendor’s general ledger).
- Allows businesses to leverage existing technology
- Does not require staff re-training to use the system
- May not work well for bigger companies with multiple ERP systems and charts of accounts
- Limited reporting capabilities
Using specialised tools
This method provides a fast track to consistent financial consolidation and reporting, as companies with disparate systems are integrated through a mapping process. Existing core financial systems and data centres remain intact, and such a tool is also relatively fast to implement with low resource impact.
- A high level of out-of-the-box functionality
- Flexible reporting capabilities
- Easy integration with other ERP systems
- Choosing the right tool in the somewhat saturated market can be difficult
Out of these approaches towards financial consolidation, one has emerged as the best choice to address the challenges associated with achieving a fast close. Find out which it is and why in our full whitepaper “Financial Consolidation: Building a bridge to operational excellence.”