Financial consolidation: more than just compliance

There’s a persistent myth that abounds that financial consolidation is merely a checkbox for compliance and a routine set of tasks that happens under dire pressure to appease the auditors. However, this leaves a lot of potential on the table. With the increasing complexity of corporate structures, the need for strong consolidation is much more than that.

Integrated financial consolidation is a strategic tool that enhances decision-making and drives business success. In this article, we’ll show you how it goes well beyond compliance and how it can be a real value driver for your organisation.

Understanding financial consolidation

 In simple terms, financial consolidation is all about combining financial data from multiple entities into a single, cohesive set of accounts that lays out the financial position of the group as a whole. This is very important for statutory reporting and meeting regulatory requirements because typically these disclosures are required at the level of the overarching legal entity.

Our thesis though is that consolidated data can also aid in strategic planning and resource allocation if it is integrated into the regular FP&A processes. It provides a bird’s eye perspective that can then be used to identify inefficiencies, duplication, resource wastage, and so on. All of this can then be fixed to achieve better unified results across the organisation.

The benefits of integrating financial consolidation into your strategic picture

Let’s examine some of the benefits on offer when you integrate financial consolidation into your FP&A strategy more intentionally:

• Efficiency gains. When your consolidation processes are a regular part of your financial operations (rather than just at specific times of the year in advance of regulatory disclosures) you can achieve much faster close cycles. This assumes that you’re using automation where possible to reduce manual processes and errors. These efficiency gains add up over the year and it can make the year-end process a lot more seamless, freeing up valuable time in that crunch period to deal with any unexpected challenges that pop up.

• Unified data view. A sustained focus on financial consolidation contributes to the single source of truth that sophisticated FP&A practitioners are working towards. This ensures that both internal and external stakeholders have full visibility into the financial realities on the ground – enhancing transparency and therefore trust.

• Enhanced insights. Consolidated financial data serves as a foundation for detailed performance analysis and predictive forecasting. Decision-makers can use integrated systems to identify trends, allocate resources effectively, and develop informed strategies based on a comprehensive understanding of the organisation’s financial health.

• A culture of automation. When you bring consolidation and close in line with your other FP&A workflows, you can leverage general progress made in automation to improve the consolidation processes themselves. More regular optimisations make for more streamlined efforts that go a long way.

• Proactive and agile. When your consolidation is always up to date and on the front foot, you put yourself in a great position to be agile and responsive to opportunities. For example, if an enterprising M&A deal comes onto the table, you’ll be well-positioned to supply consolidated financials that are timely and accurate – rather than having to rush out numbers that you weren’t prepared to prepare.

These benefits can transform consolidation and close from a chore into something that adds real value and supports the growth potential of your organisation.

Key metrics to track for robust financial consolidation

Measuring the effectiveness of financial consolidation requires more than just compliance checks. By monitoring specific metrics, organisations can gauge performance, identify areas for improvement, and ensure alignment with broader strategic objectives.

Here are some key metrics to focus on:

• Close cycle time. This metric tracks the duration of the financial close process, from the start of consolidation to the final reporting stage. Reducing close cycle time indicates improved efficiency and the successful implementation of automation and streamlined workflows.

• Data accuracy and error rates. Monitoring error rates in consolidated financial reports help ensure data reliability. High accuracy not only builds stakeholder confidence but also reflects well-optimised consolidation processes.

• Intercompany transaction resolution. Tracking the time it takes to reconcile and eliminate intercompany transactions provides insight into the efficiency of internal processes. Faster resolution indicates better integration and alignment across entities.

• Adherence to regulatory deadlines. Ensuring that financial reports are submitted within regulatory timeframes is crucial. Tracking this metric helps assess how well your consolidation process supports compliance requirements.

• Stakeholder satisfaction. While qualitative, measuring satisfaction among users of consolidated financial reports (e.g., executives, auditors) provides valuable feedback on the accessibility, transparency, and utility of the information.

By keeping a close eye on these metrics, organisations can turn financial consolidation into a measurable and continuously improving process, enhancing its strategic value.

From compliance to strategic advantage 

Hopefully, we’ve convinced you that financial consolidation and close can offer a lot more than compliance – they can drive strategic advantages for your organisation. The start of the new year is a good time to evaluate your current systems and consider integrating your consolidation and close so that you can stay competitive. At the end of the day, integrated financial consolidation is not just an operational necessity but a critical enabler of organisational success.

Apliqo offers a highly sophisticated consolidation and close product that has served our clients very well when aiming for unified financial planning and analysis. To find out more about the offering and explore whether it could work for you, get in touch today.  We can’t wait to hear from you.