Financial consolidation sounds straightforward; it is the process of combining the financial statements of all subsidiaries into a single financial statement for the group as a whole.
In practice, however, it is significantly more complicated and technically challenging than simply adding all the relevant figures together. For some companies, it is a time-consuming part of the month-end process.
It often comes down to two challenges: specialist knowledge and heavy operational tasks.
- Specialist knowledge because it is often not done regularly. Hence, the finance function has to refresh their memory every time or have simply never done it before they joined the Group’s finance function.
- The heavy operational tasks such as manual calculations, collecting data from all subsidiaries, error tracking, etc., might not be difficult as such but take up a significant amount of time.
Ultimately, it can put enormous pressure on the CFO and the finance function.
If your business fits the following profile, it is worth investigating outsourcing your financial consolidation process to a CaaS provider like ireport:
- Annual revenues in the range of £10m to £50m or higher.
- Investor-backed.
- Required to have an annual audit.
- Need to consolidate three or more companies (UK and/or international).
- Have a busy, small finance team who may be fine with the day-to-day but think the international or technical element is frightening.
- Running more than one accounting system.
- Current accounting systems do not have inbuilt consolidation (such as Xero, Sage and QuickBooks), so you may be doing consolidation in spreadsheets.
What are the top consolidation challenges?
The most common challenges companies must overcome are:
- Lack of confidence and/or technical knowledge in performing consolidation.
- Time availability and staff resources.
- Getting timely and accurate input data from subsidiaries.
- Managing multiple currencies and their impact on the group accounts.
- Using incompatible systems and tools.
- Constantly changing statutory reporting and compliance requirements (e.g., GAAP and IFRS).
- Differing accounting treatments in different countries.
- Providing the leadership team with timely insights.
For the finance function to play a strategic role in the business, the month-end process must take hours, not weeks, to complete.
Leveraging technology like Konsolidator to automate and streamline the consolidation processes will help overcome most of these common challenges and ensure an accurate audit-compliant consolidation.
Why choose Konsolidator’s consolidation software?
Konsolidator was founded in 2014. Their mission was to create consolidation software to overcome the challenges of doing financial consolidation in Excel. Software to standardise data, minimise errors and automate tasks while accelerating the financial consolidation and reporting process.
The Konsolidator software was built by CFOs for CFOs. It is a cloud-based software-as-a-service (SaaS) that enables group finance in small and medium-sized companies to leave complex and time-consuming calculations to the software. It unlocks the finance function and enables it to become vital to strategic decision-making with fast, actionable insights based on key performance data.
What makes Konsolidator a unique consolidation software is the richness of functionality (see below), the extent of inbuilt automation and conformance with regulatory guidelines. It offers the following functionality:
- Automated consolidation of actual, budget and forecast numbers, including:
- Profit & Loss, including segments, business units and product lines
- Balance Sheet
- Financial and Operational KPIs
- Cash flow statements for subsidiaries, sub-group and parent group
- Automated calculations of:
- Intercompany eliminations
- Elimination of investment in subsidiaries
- Minority share calculation and elimination
- Currency translation and exchange rate adjustments
Furthermore, the Konsolidator software will connect with existing accounting systems (for example, Xero, Microsoft Business Central, Sage and QuickBooks), making it a perfect solution for fast integration
Konsolidator is a worry-free solution in an affordable package.
Related Article | Finance consolidation software partnership with Konsolidator
What is consolidation-as-a-service (CaaS)?
Consolidation-as-a-Service providers like ireport take the headache of consolidation away by managing the consolidation process for you. They offer cost-effective access (usually via a subscription) to the tools, people and skills needed to perform an accurate accounting consolidation process for your company:
- Run the month-end close at the entity level for each company in the group, including full reconciliation and agreement of all intercompany balances.
- Each company then submits accounts for consolidation at group level, often in an agreed format (the “unit input”).
- Assess the unit input in case adjustments may be needed (e.g. to switch from local GAAP to IFRS).
- Convert from local currency into the group currency and account for any resulting translation movements.
- Post intercompany elimination adjustments to remove the effect of transactions and balances between group companies.
- Post other consolidation adjustments such as accounting for the acquisition or disposal of subsidiaries, goodwill, elimination of subsidiary share capital, accounting for minority interests and other such technical matters.
- Report the results to both internal and external stakeholders. This will generally need to include a group cash flow statement and may also need to show bank covenant calculations as evidence of compliance.
Related article | Why outsource finance consolidation?
If you think we can help, please contact info@ireportonline.co.uk, complete our online form or call 01784 770880.