How to Use Automation to Improve Your Financial Consolidation Process
Businesses are under intense pressure to manage the financial consolidation process in a timely and efficient manner. For publicly traded companies, this is particularly important, and yet the task can be challenging even with many established ERP products. Decision makers increasingly require financial statements on a more regular basis to gain better business visibility, as well as meet external reporting requirements. Reporting software is more critical than ever.
Unfortunately, most ERP software does a poor job of producing consolidated financial reports. If you have multiple legal entities running different systems, the challenges of consolidated reporting multiply. Add the nuances of GAAP vs. IFRS reporting, and the process can quickly become overwhelming. Managing all that complexity using manual processes is unnecessarily slow and tedious, often introducing errors.
Specialized Tools for Consolidation Process Improvement
Depending on your industry, you may report to multiple regulatory bodies as well, some of which can span US and international markets. Of course, regulatory bodies aren’t the only entities with an interest in financial consolidation; this process is also essential to providing stakeholders and investors with better information and disclosures about the state of the organization.
The challenges businesses face in meeting these objectives include streamlining the financial close process, integrating sets of financial data without compromising the accuracy of those data, ensuring visibility of the consolidation and close process, and managing costs to remain within budget.
To meet these ever-growing demands, businesses turn to automation solutions that facilitate faster, more efficient financial consolidation.
The Four Benefits of Automation
Some of the benefits of automation seem obvious. Your team can spend less time performing manual tasks and more time applying their skills to thoughtful analysis. Others, though, are less apparent. Here’s how automating your close and consolidation processes can solve some of the common problems faced by corporate finance teams.
- Automation eliminates many common sources of errors. When you rely on manual processes, human error is inevitable. Even your most organized, detail-oriented team member can make mistakes. Mistakes in financial reporting can lead to costly and potentially embarrassing inaccuracies.
When you automate your close and consolidation processes, you can eliminate much of the inevitable human error that arises from incorrect data entry, copy/paste mistakes, or even changes to source or destination file formats that produce unexpected (and erroneous) results when you are creating your intercompany accounts. Automation allows you to better define how protocols are followed and who can access your company’s sensitive financial information. This not only prevents errors but also reduces the risk of fraud by keeping tabs on user activity and individual transactions.
- Automation speeds up the closing process and improves real-time visibility. In the context of a rapidly changing business environment, leaders are eager to get information as quickly as possible, but without sacrificing accuracy. Many have turned to more frequent reporting and planning cycles as a way of increasing business agility and responsiveness. When your organization relies on manual processes to produce monthly reports, the finance team inevitably gets bogged down with tedious and repetitive tasks that consume far more time than they should. Automation removes a great deal of friction from that process, producing results much faster.
With close and consolidation automation tools, you can link all of your company’s financial results back to your original data sources, providing a higher level of transparency in your reporting. As a result, your finance team can spend less time tracking down source information. Instead, they’re able to get answers to important questions quickly and easily. Automated data uploads deliver your company’s key financial stats in real time. Combined with a financial dashboard, this detailed level of reporting keeps you better equipped to meet the challenges facing your business.
- Automation increases overall productivity. Implementing automation in your financial reporting and planning processes may be the single most significant action you can take to boost the productivity of your finance department. Manually generating financial reports is tedious and consumes valuable time. With automated financial software, you can combine data from different sources and create reports in a fraction of the time they would otherwise require. This leads to significant cost savings. Employees who were once burdened with manually creating reports can cut down on overtime during the usual crunch-time as reporting deadlines loom.
- Automation shifts valuable resources to high-value activities. In many organizations, the finance team is playing a more strategic role than ever before. CFOs are key players in setting strategic direction, and often serve as corporate liaisons. When you implement software to automate close, consolidation, and financial reporting and increase the efficiency of your finance department, you and your employees can focus on higher-value activities that hold greater strategic significance. With extra time to observe, reflect, and ask the hard questions, you can help generate the data-driven, actionable insights that drive growth in your business.
Specialized Tools for Consolidation Process Improvement
Automation calls for purpose-built tools. Although spreadsheets are the go-to solution for many organizations, they simply can’t handle the heavy lifting required for true financial reporting automation. Spreadsheets lack support for workflows and other important functions that enable effective collaboration and security.
Spreadsheets may have filled an important gap for organizing data for a time, but they ultimately don’t provide everything that the finance team needs to do their job effectively. Companies that aim to streamline the financial consolidation process should look beyond spreadsheets to some of the transformative software products on the market that provide better functionality and can support businesses of any size.
Tools that are purpose-built for close, consolidation, and financial reporting provide better, faster, and more cost-effective results. They provide greater clarity and timeliness for regulatory bodies, stakeholders, and employees, all at the same time.
Here’s how these corporate financial software solutions can upgrade your current consolidation process workflow.
Automating Your Consolidation Process Workflow
Take a minute to think about all of the different workflows you have for your consolidation process. You have different team members in the office of the CFO and other departments all managing different data. You may have teams in different subsidiaries reporting results to the central office. You have processes for creating month-end, quarter-end, and year-end consolidated financial statements.
There are specialized tools that can help you standardize and document these processes. There are others, like Longview Close, that can take it one step further and automate your consolidation process flow steps, tasks, notifications, and approvals.
Automating your workflow for closing financial statements can improve your team’s efficiency and accountability because each step is clearly mapped with dependencies, notes, reminders, and more. This automation can also help you with onboarding new employees and training them on your process, which is critical for growing organizations.
Real-Time Data Consolidation
Outside of automating the tasks that your team must complete, you can also improve your close process by using technology that smartly automates your consolidation calculations. Imagine having the data you enter auto-update all corresponding data points in real time across various regions and time zones, without manual intervention, as easy as a click of a button.
Batch consolidation projects may be a logical approach to project management for human financial professionals, but this approach is inefficient on a macro level and inevitably lengthens the amount of time required to complete the financial close.
Automation solutions can consolidate these data in real time, updating and organizing data as they enter the system. With a real-time solution in place, data and resulting financial statements can be ready for review shortly after you have received all of the required data, minimizing the time required to close.
Each time you enter data by hand into a spreadsheet, it creates new opportunities for inaccuracies that disrupt financial consolidation. Even in the best-case scenario, this creates additional costs for organizations, in addition to slowing down workflows.
Automated consolidation, in contrast, is more reliable and doesn’t create the risk of data being inaccurately copied from its source. As information is consolidated with an effective zero percent error rate, employees previously tasked with this job can instead devote their time and resources to validating the data, improving the quality of data sets.
Increased Time for Analysis, Validation, and Strategy
Many aspects of financial consolidation are a poor use of human capital. Thanks to today’s technology, you can avoid the time demands of this process altogether.
When you relieve your team of tedious tasks and hand them off to an intelligent automation solution, your human workforce can allocate its resources to analyzing consolidated data sets, validating data and reports, and helping shape financial or business strategies to improve performance in the future.
Tax data and financial analytics provide benefits that extend far beyond a single financial consolidation cycle, generating insights to improve practices going forward, both for financial teams and for the company’s larger operations.
What About Implementation?
Don’t let concerns about a lengthy implementation project dissuade you from moving forward with automation. In fact, depending on your organization, you can implement automated close and consolidation tools in a matter of weeks, and see a high return on investment. Close and consolidation solutions can often pay for themselves in less than twelve months. Modern financial software is intuitive, user-friendly, and easily tailored to fit the unique needs of your organization. Here are some best practices for corporate finance teams looking to implement automated close and consolidation software to help their financial reporting.
- Have a complete solution for financial reporting: When choosing a program to automate your financial reporting, make sure it can handle all of your essential reporting functions, from monthly reports to financial statements for regulatory agencies. Look for seamless integration, operational reporting capabilities, and advanced analytics.
- Look for integration with multiple ERPs: If your organization is running multiple ERP systems–for example, if you have several subsidiaries running different ERP software than the parent company–it is especially important that your close and consolidation software can integrate with all of them. Even if you currently have a single-ERP environment, you should consider “future-proofing” your investment to account for possible acquisitions in the future, or migration to a different ERP system down the road. The right close and consolidation tools can make that transition much easier.
- Enhance reports and graphics: Don’t just focus on making your consolidation and reporting process faster; aim to make it better as well. Any solution you choose should contain robust analytics and strong data visualization to enhance your reporting. Executive dashboards provide a powerful means of communicating corporate performance to strategic decision-makers in your organization, or to a wider audience of stakeholders.
- Be flexible: Advanced reporting software can customize your reporting content, style, and formatting to meet your company’s evolving needs. Unfortunately, many products require significant IT expertise and training. Look for software that allows non-technical users to design and modify reports without assistance from the IT department.
- Think beyond financial reporting: Consider how an integrated and automated close and consolidation solution could improve other finance-related workflows that fall under the office of the CFO.
Conclusion
Automation has become a hot topic since the onset of the COVID-19 pandemic in early 2020. Remote work has compelled business leaders to adopt collaboration tools that support a distributed team to work together more effectively. By making smart investments in the right technology, many business leaders have made it easier to weather the storm by automating manual processes. At the same time, they have increased speed, accuracy, and business agility.
Investments in better financial technologies don’t just simplify life for your financial professionals. Ultimately, they improve your organization’s bottom line.
In the financial world, automation tools streamline tasks and even help you attract better talent for your financial team. With such comprehensive benefits, businesses should lean into close and consolidation automation tools as an easy solution to underpin a host of corporate reporting challenges.
If your organization is struggling with a tedious, error-prone financial consolidation process, we can help. For over two decades, insightsoftware has been helping finance teams work smarter and more efficiently with financial and operational reporting, planning and budgeting, consolidations, and closing. To learn more about how insightsoftware can help you, schedule a free demo today.