Streamline the financial consolidation process with Unit4
Consolidating financial data for a year-end review or financial close can create unmanageable workloads for those with legacy systems. That said, modern Cloud ERP presents an effective solution to streamline financial consolidation even across complex structures.
With Unit4’s finance and accounting software, your organization can take a flexible, integrated approach to all your organization’s financial planning needs, whether planning cash flow, managing operational budgets, or forecasting sales, costs, and revenue.
Keep reading to learn more about financial consolidation, the challenges to financial consolidation with legacy systems, and how technology can make the processes safe, simple, and accurate, especially when integrated with your ERP – the single source of record in your organization
What is Financial Consolidation?
Financial consolidation is the process of joining together the financial data from different departments, divisions, functions, subsidiaries, or organizational entities within an organization, usually for group reporting purposes.
This essential practice ensures that financial information from across the organization is standardized, reconciled, and presented as a single, cohesive snapshot of the company’s overall financial position.
Consolidating the diverse financial reports from these different departments into a single financial snapshot gives C-Suite, finance, and other departmental stakeholders valuable insight into the overall financial health of the organization.
The process of financial consolidation often includes aligning different reporting standards, and ensuring compliance, across entities, with financial regulations such as GAAP or IFRS. Many companies streamline this process using advanced financial consolidation software, which automates repetitive tasks, improves data accuracy, and accelerates reporting timelines.
Why is Financial Consolidation important?
Financial consolidation of data helps organizational leaders understand each department’s performance through accurate and consistent reporting.
For organizations operating across multiple regions or business units, financial consolidation is essential for:
- Financial Transparency: Provides a clear and consistent financial overview for internal and external stakeholders.
- Regulatory Compliance: Ensures adherence to financial reporting standards, including local and international regulations, as well as tax compliance.
- Strategic Decision-Making: Delivers actionable insights into revenue streams, operational costs, and overall profitability.
- Investor Confidence: Demonstrates financial accountability and stability to investors and shareholders.
Without consolidated data, it can be difficult to assess financial performance across different departments. Consolidated financial statements provide a true view of an organization’s financial health and performance.
Through the financial consolidation process, organizations gain the ability to generate monthly financial statements to understand financial performance. Naturally, this integrated view of financial health allows financial professionals to create forecasts, budgets, targets, and organizational objectives.
Financial consolidation means finance teams can accurately assess risks and opportunities with accurate data from all organizational entities, gives investors a clear view of finances, and with a single source of truth the office of the CFO can understand the actions to take concerning financial performance.
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Keep reading to learn more about financial consolidation, the challenges to financial consolidation with legacy systems, and how technology can make the processes safe, simple, and accurate, especially when integrated with your ERP – the single source of record in your organization
What is Financial Consolidation?
Financial consolidation is the process of joining together the financial data from different departments, divisions, functions, subsidiaries, or organizational entities within an organization, usually for group reporting purposes.
This essential practice ensures that financial information from across the organization is standardized, reconciled, and presented as a single, cohesive snapshot of the company’s overall financial position.
Consolidating the diverse financial reports from these different departments into a single financial snapshot gives C-Suite, finance, and other departmental stakeholders valuable insight into the overall financial health of the organization.
The process of financial consolidation often includes aligning different reporting standards, and ensuring compliance, across entities, with financial regulations such as GAAP or IFRS. Many companies streamline this process using advanced financial consolidation software, which automates repetitive tasks, improves data accuracy, and accelerates reporting timelines.
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Why is Financial Consolidation important?
Financial consolidation of data helps organizational leaders understand each department’s performance through accurate and consistent reporting.
For organizations operating across multiple regions or business units, financial consolidation is essential for:
- Financial Transparency: Provides a clear and consistent financial overview for internal and external stakeholders.
- Regulatory Compliance: Ensures adherence to financial reporting standards, including local and international regulations, as well as tax compliance.
- Strategic Decision-Making: Delivers actionable insights into revenue streams, operational costs, and overall profitability.
- Investor Confidence: Demonstrates financial accountability and stability to investors and shareholders.
Without consolidated data, it can be difficult to assess financial performance across different departments. Consolidated financial statements provide a true view of an organization’s financial health and performance.
Through the financial consolidation process, organizations gain the ability to generate monthly financial statements to understand financial performance. Naturally, this integrated view of financial health allows financial professionals to create forecasts, budgets, targets, and organizational objectives.
Financial consolidation means finance teams can accurately assess risks and opportunities with accurate data from all organizational entities, gives investors a clear view of finances, and with a single source of truth the office of the CFO can understand the actions to take concerning financial performance.
Challenges teams face in the financial consolidation process:
- Manual processes - Manual data entry isn’t just time consuming and repetitive for financial professionals but can often result in errors. While these errors can be avoided, they can result in an inaccurate representation of financial health and performance often leading to missed opportunities, compliance risks, and potential fines.
- Siloed Data – The process of financial consolidation aims to bring together an organization’s entire financial records across various entities, teams, and more. When data is siloed within entities this means different processes, standard practices, even currencies, but it’s much easier to consolidate data that follows the same rules.
- Interdepartmental Continuity - When an organization needs to report on and make adjustments for interdepartmental transactions, such as between two subsidiaries or with a parent company. Consolidating interdepartmental incongruities takes time, produces bottlenecks, and could be dealt with easily if reporting was standardized.
- Changes to reporting regulations - Reporting guidelines, statutory requirements, and compliance regulations are continually changing, and it can be tough to track and implement these changes easily across data siloes with different procedures for reporting.
- Currencies and exchange rates - Accounting regulations and standards differ from country to country. Each organizational entity must meet the reporting standards of its country. Exchange rate calculations and currency consolidation can be prone to error and create unmanageable workloads.
- Security maintenance – Maintaining data security during the sharing of data for financial consolidation is tough with legacy systems. Sending spreadsheet files across the organization can create vulnerabilities as these legacy files can easily be accessed by cybercriminals.
How can technology improve the financial consolidation process?
Organizations need to invest in an ERP and FP&A system that gives finance teams an efficient, user-friendly way to consolidate financial data, carry out group reporting, and connect all users in one single system, wherever they are in the organization, by using a single source of the truth.
ERP software, as a system of record that includes financial planning and analysis (FP&A) software, makes intercompany reconciliation easier by standardizing processes, reporting frameworks, and more, across the entire organization.
Automating repeatable but procedural consolidation tasks, such as exchange rate calculations, can reduce errors, save financial teams time they can use for analysis, and provide confidence throughout the process. More advanced ERP systems utilize AI and machine learning to present forecasting and budgeting ideas.
Importantly, software can be configured and adapted to your organization’s unique requirements, which also provides great agility when local and regional compliance changes, such as IFRS 16 or GAAPs, which happens often.
Compliance continuity is achievable through pre-configured templates that are created to satisfy specific compliance regulations - with predefined rules to prevent errors. Provide an audit trail and automatic consolidation process, including journaling and drill-down capabilities.
How Unit4 FP&A can improve financial consolidation
Our ERP suite, containing FP&A software, can free your teams to spend more time delivering insights and creating value for the organization, rather than wasting time on manual processes developing greater trust with investors, and a smoother process.
Unit4’s finance software will also provide a clear process for financial consolidation with predefined workflows, status monitoring, consolidation rules, approval bottlenecks, roles-specific tasks, and more.
Post consolidation, Unit4’s finance software provides many features that can integrate charts, graphs and create dashboards for teams to analyze and report on financial performance.
By using Unit4’s finance software for financial consolidation, you have a single view of the truth. By providing finance with a complete view of their data they can:
- Ensure accurate compliance
- Utilize integrated data for planning, reporting, forecasting, and analysis
- Optimize reporting with automatic distribution and visualization
- Open up data for self-service analysis
- Save time and costs int eh financial consolidation process
- Bolster data security in the Cloud
To learn how Unit4 can help your organization with financial consolidation, visit our website, our dedicated product pages, or talk to sales today.
