Data collected at every level of your company matters. Even today, some still rely on outdated excel sheets from branches, which they subsequently consolidate. This method risks the integrity of data as it’s vulnerable to human error. When companies are emailing spreadsheets back and forth, it can be a confusing, error-prone, and time-consuming.

The best practice is to implement an automated system to reduce errors and increase efficiencies. Using tools that also introduce consistency across all branches is critical. For instance, using a system that has a chart of accounts that streamlines how you record information and supports best practices in data management.

Reports that allow you a 360° view of your company’s performance

Generating and analyzing reports is a crucial part of the financial consolidation process. To do it well, you first need reliable data. Once this has been taken care of, you need to make sure that your reporting tools not only give you a high-level overview but allow you the granularity of drilling down into each branch’s performance. By having a full view of all financials, it will be easier to fix inefficiencies and measure each location’s effectiveness.

Enable your team with continuous training and change management

Financial consolidation is a big project, often requiring a mix of new tools, software and skills. Find out if any of your team has experience with financial consolidation and use their existing knowledge to help decide on the resources and tools that are most appropriate. Perhaps they’ve used software built for your industry that can streamline the process.

The best practice is not merely using what already exists within your organization. Effective financial consolidation will most likely require a lot of change. Invest appropriately in change management to help integrate software, train staff and implement processes.

If your team currently uses spreadsheets, you will need to make sure teams at each branch receive ongoing training until new systems are stable. One training day will not cut it. Financial consolidation is a continuing process, so make sure there’s always someone on hand to help with the transition. Financial consolidation is adopted more effectively where a change manager has been available throughout the transition period (think months rather than days!).

Identify and eliminate bottlenecks in the workflow

Financial consolidation is a continuous process that is more about sustainable workflows between companies than simply ticking some boxes. Continued efforts to make sure the new systems fit your company’s specific needs will be necessary. As issues arise, they can be tackled on a case by case basis, until you’ve established the best practice for your company’s exact situation.

Although you must adhere to rigorous standards, it’s important to remember that as you scale and change, so too will the regulations and compliance standards you need to meet. By continually seeking to identify and implement changes where bottlenecks or new regulations occur, you will future proof your systems.

Make sure the finance team are thoroughly trained and have complete administrative powers

There’s nothing worse than an easily avoidable bottleneck. One issue companies run into is making their financial consolidation system IT reliant. They train the IT team and get them to implement and integrate the system, with the idea that they will teach the finance team. Although well-intentioned, this method can be problematic as IT may not fully understand all the nuances of financial consolidation and compliance or ask the right questions.

Sometimes, admin privileges also rest with IT, which can be problematic in larger companies. Most fellowships use hundreds of different systems and tools each day. Waiting for IT to respond to a ticket every time the system runs into an issue can create blockages in the workflow. It should be possible for the accounting team and cost center managers to edit and create their reports without assistance.

Focus on fast close and reporting cycles for optimum performance

One of the benefits of financial consolidation software is that it speeds up reporting and close cycles. This means stakeholders (as well as auditors) get accurate reports much faster. Companies can track real-time performance and create strategies to tackle sub-par performances more quickly than with slower, more traditional close cycles.

Without the appropriate software, it’s not unusual to hear of companies struggling to complete close cycles and generate comprehensive reports over an entire month. With the proper software, you complete close cycles in a matter of days with much more accuracy and less stress.

Stay on top of IFRS and GAAP regulations to enable compliance

One of the purposes of financial consolidation is to make it easier for your company to prove compliance. However, no system can ensure compliance, so you need to stay on top of regulations and standards, particularly when your company undergoes significant changes like introducing a new legal entity. Constant growth means constant change, and both IFRS and GAAP regulations can change the way you need to report or recognise certain financial information.

Automate matching, reporting and eliminations for intercompany transactions

Using a system to automate matching, reporting, and eliminations from intercompany transactions can dramatically decrease your reporting errors. When managed manually through spreadsheets, these are time-consuming processes, and there’s usually not enough control over the data entered. These ongoing errors become evident in the final phases of financial consolidation. They are cumbersome to remedy and may require sifting through incredible amounts of data to find a single typo. By automating these time-consuming processes, you reduce the amount of time spent triple checking for data integrity.

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A multi-company business must consolidate when one company has a majority of the voting power in another company, with over 50% of the subsidiary’s outstanding common stock.

However, if the parent has minority ownership, it may still need consolidation accounting if the parent exerts significant influence over the subsidiary’s business decisions. Then consolidated financial statements must be prepared using the same accounting methods across the parent and subsidiary entities. These include the consolidated statement of income and the consolidated balance sheet.

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• Accurate forecasting and strategic mapping of company goals
• Aligning entities based on key performance metrics
• Compliance with accounting standards ASC 810 and IFRS 10
• Ability to get an accurate picture of overall company health
• Convincing stakeholders to make strategic investments

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• Potential investors can judge the financial health of the group and its subsidiaries
• It reduces the burden of preparing separate financial statements for all subsidiaries
• Inter-company transactions can be properly accounted for.

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• Consolidated statement of income: showing income and expenditure
• Consolidated statement of financial position: showing assets, funds, and liabilities
• Consolidated statement of cash flows: from operating and investing activities
• Consolidated statement of changes in funds.

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In a wider sense, accurate and timely consolidated financial reporting is about much more than the consolidated financial statements needed for compliance. It gives leadership teams a detailed view of, for example, the best and worst-performing business units or products, and can help them to identify risks and opportunities.  

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In a broad sense, consolidation is defined as the action or process of combining things into a more effective or coherent whole. In accounting, the definition of financial consolidation can be summarised as:

“Combining the assets, liabilities and other financial items of two or more entities into one consolidated entity.”

That involves the consolidation of financial statements, where all subsidiaries report under the umbrella of the parent company.

Even if the subsidiaries are separate legal entities to the parent company, and therefore record their own financial statements, they are still included in the consolidated group financial statement. It is also possible to have consolidated financial statements for a portion of a group of companies. For example, some groups may produce consolidated financial statements for one of their subsidiaries and those other entities owned by that particular subsidiary. 

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