Today’s CFOs are under increasing pressure to comply with reporting and compliance requirements. Finance teams worldwide are starting to realize that spreadsheets alone are no longer sufficient in dealing with today’s changing economic context.
For one, many businesses perform financial consolidation using outdated software and find themselves wrought with different challenges in gathering accurate data and reports.
In this article, we’ll look into the common mistakes most people make when doing financial consolidation.
Manual Reconciliation which Can Lead to Errors
Financial consolidation is the process of integrating financial data from different business units within the organization for reporting. Because data integrity is crucial to financial consolidation and reporting, manual reconciliation using spreadsheets can do more harm, especially when it leads to low-quality data and unnecessary errors.
For example, tracking down pricing changes and contracts and having to do cross-checking on all transactions only takes up more time and can lead to inefficiencies, which only serve to prolong the consolidation phase. On the other hand, finance teams may have to deal with an ever-piling workload, which leads to weak quality data and ineffective financial consolidation.
For a business to thrive in today’s challenging times successfully, it needs to have clear and accurate data and clean books.
Managers need access to actionable data, which legacy enterprise systems may find it challenging to meet. CFOs also need to have a data adjustment system that would allow them to eliminate historical transactions when necessary.
Unfortunately, Excel spreadsheets do not offer this, cannot provide real-time reporting, and lack in-depth analysis and collaboration features that most FP&A software today already have.
The Use of a Disintegrated System and Lack of Multi-currency Support leading to Inaccurate and Less Actionable Data
As mentioned earlier, financial consolidation requires information collected from all business entities and grouped into one set of financial statements. C-suites need these financial statements for an informed strategy and to make better business decisions.
It usually takes time to compile this data as it comes from multiple sources. Any problem with one segment of data can only prolong the completion of the report. Another example of a potential problem is having to convert different currencies from a parent company. If someone fails to update the exchange rate, this can impact the data’s consistency and accuracy on the report, which may render it useless.
The Use of a System that doesn´t reflect Changing Reporting Requirements
Government and industry compliance requirements are continually changing. Businesses will need to adapt and apply these changes in their financial consolidation and reporting process. These changes can lead to bottlenecks, which can lead to financing teams updating the data manually themselves. Data reformatting may also be necessary to comply with these changes.
Finance teams need to always be in the know with the latest regulations and compliance requirements or risk having to backtrack and update any data they may have already completed, which can delay their financial consolidation. It is more than challenging to keep these risks at bay, which is why having the latest FP&A software compliant with these changes and updates is crucial to business success.
Lack of Security leading to Data Manipulation
Spreadsheets have never been known for their rigid security layers. They can be prone to data manipulation and unauthorized edits, which can easily lead to fraud. Using spreadsheets in financial consolidation can only enable fraud, which leaves financial statements unable to accurately portray the business’s actual status and health.
When parent companies overlook reports from other business entities, they can manipulate data and hide any problems and liabilities in their reporting.
Financial Consolidation Using Performance Canvas Financials
Many of these issues discussed are easy to resolve with the right financial consolidation software solution, such as Performance Canvas Financials.
Performance Canvas enables teams to store all data in one platform, making it easy for them to consolidate data and create real-time reports. It’s robust integration capabilities also help minimize potential bottlenecks and cuts the wait time for finance teams having to go back and forth with their data mining and reporting.
Performance Canvas helps businesses harness their data to make strategic decisions. It also provides businesses with accurate data and forecasts while ensuring transparency and better accountability. CFOs and their teams can apply business rules or automate processes to ensure everything is optimized for improved efficiency.
If your finance teams struggle with the same errors and mistakes in your financial consolidation process, Performance Canvas Financials is better equipped to help you iron them for better efficiency.
Performance Canvas can address simple to highly complex consolidation requirements because of its developers’ and consultants’ expertise in the entire FP&A process.
If you are unhappy with your current consolidation solution, Performance Canvas is a reliable and cost-effective alternative.
Get in touch with us to learn more about our packages today.
