A Comprehensive Comparison of Financial Consolidation Tools

With the increasing complexity of business operations, manual consolidation is becoming less feasible and more error-prone. This is where technology comes in. Here, we compare various financial consolidation tools and offer guidance on choosing the right solution for your organisation. 

Table of Contents 

•  Understanding Your Options: Types of Financial Consolidation Tools 
• Comparing Financial Consolidation Tools 
• Factors to consider when selecting your consolidation tools 
• Conclusion

Understanding Your Options: Types of Financial Consolidation Tools 

There are several types of software solutions available to assist with financial consolidation: 

• Spreadsheet software (e.g., Excel) 

• Enterprise Resource Planning (ERP) systems with a consolidation module 

• Specialized financial consolidation software 

• Enterprise Performance Management (EPM) suites 

• Accounting software with a consolidation module 

Comparing Financial Consolidation Tools 

1. Spreadsheet software

Spreadsheet software like Microsoft Excel is a versatile tool that can be used for financial consolidation, especially for small to medium-sized businesses with relatively simple financial structures. However, as the complexity and volume of data increase, its limitations become more apparent. 

Such limitations can lead to devastating consequences, as detailed in our previous article.   

Strengths: flexibility, accessibility, and cost-effectiveness 

Weaknesses: increased risk of errors, time-consuming process, lack of audit trail, inefficient collaboration, and limited capability in handling large datasets and complex structures.  

Best For: Small businesses with limited data volume and simple consolidation requirements without complex intercompany transactions. Or temporary or one-time consolidation projects. 

2. Enterprise Resource Planning (ERP) Systems

ERPs integrate various business functions, including financial management, with robust consolidation capabilities. They support multi-currency consolidation, intercompany eliminations, and compliance with accounting standards. 

Examples: SAP S/4HANA, Oracle ERP Cloud, Microsoft Dynamics 365.  

Strengths: Comprehensive integration of business processes, scalable, and robust consolidation features. 

Weaknesses: High cost and complexity, requires significant implementation time and resources. 

Best For: Large organisations with complex financial structures and a need for integrated business processes. 

3. Specialised financial consolidation software

These solutions are specifically designed for this purpose, offering comprehensive features and scalability. 

Examples: OneStream, Wolters Kluwer CCH Tagetik, Fluence Technologies, Vena Solutions. 

Strengths: Specialised features for financial consolidation, real-time data integration, and advanced reporting. 

Weaknesses: Can be costly and complex to implement, often requires specialised expertise. 

Best For: Medium to large enterprises needing advanced consolidation capabilities and robust reporting. 

4. Enterprise Performance Management (EPM) suites

These suites provide a broader range of financial management functionalities, including consolidation, budgeting, forecasting, and reporting. You can refer to our previous post to see how these suites are stacked against one another.  

Examples: IBM Cognos, SAP Business Planning and Consolidation, Oracle Hyperion, and Infor EPM. 

Strengths: Integrated planning and consolidation, comprehensive data analysis. 

Weaknesses: Complexity and cost of implementation, steep learning curve. 

Best For: Organisations looking for a unified platform for financial and operational performance management. 

5. Accounting software with a consolidation module

Many modern accounting software solutions offer consolidation functions or modules. These tools are typically designed for mid-sized businesses with multiple entities or subsidiaries. They provide varying levels of consolidation capabilities, from basic intercompany transactions to comprehensive financial consolidation. 

Examples: Infor SunSystems, QuickBooks Online Advanced, Xero, Zoho Books.  

Strengths: Integrated financial management, affordable, suitable for smaller organisations. 

Weaknesses: May lack advanced features of specialised consolidation tools, limited scalability. 

Best For: Small to medium-sized businesses needing integrated accounting and consolidation functions. 

Factors to consider when selecting your consolidation tool 

When selecting a financial consolidation tool, consider the following factors: 

• Business Size and Complexity: Small businesses with simple structures might suffice with spreadsheet or accounting software, while larger organisations with multiple entities and complex operations will require dedicated consolidation software or EPM suites. 

• Data Volume and Sources: Evaluate the amount of data to be consolidated and the variety of sources involved. 

• Consolidation Frequency: Determine how often consolidation is required (monthly, quarterly, annually). 

• Reporting Requirements: Consider the types of consolidated reports needed (balance sheet, income statement, cash flow, etc.). 

• Currency Management: If your organisation operates in multiple currencies, the tool should support currency translation and conversion. 

• Intercompany Eliminations: The software should handle complex intercompany transactions and eliminations accurately. 

• Data Integration: The ability to seamlessly integrate data from various sources is essential. 

• Scalability: Ensure the tool can accommodate future growth and increasing data volumes. 

• User Experience: The software should be user-friendly and accessible to finance teams. 

• Cost: Evaluate the initial investment and ongoing costs, including implementation, training, and maintenance. 

To select the optimal tool, carefully assess your organisation's specific needs and limitations. Consider conducting a thorough evaluation of available options, including demonstrations and pilot projects if possible. 

By carefully considering these factors and selecting the right tool, you can significantly improve the efficiency and accuracy of your financial consolidation process, providing valuable insights for informed decision-making. 

Conclusion 

While spreadsheets can be a starting point for small-scale consolidations, they often fall short in terms of accuracy, efficiency, and scalability. For organisations seeking a reliable, efficient, and accurate consolidation process, investing in dedicated financial consolidation software or an EPM suite is typically the best approach. 

If you think an EPM suite might be the solution to your consolidation challenge, download this free whitepaper today and learn everything you need to know about EPM software.