CFOs have one of the most stressfull jobs on the planet and “Larger workloads send CFO stress through the roof” as we showed in a recent post, see. Several of the comments on this post on LinkedIn mentioned the need to reduce recurring manual-intensive & error-prone processes that, all too often, CFOs have to rely on. The answer is some form of process automation and automated controls through SaaS or similar solutions.

Tricks to minimise stress

The recent excellent article in CFO Innovation by Darshana Sanghavi, WizProTek Consulting, highlighted the problems in financial consolidation, close and reporting processes. Sanghavi explained that, “In a typical company he has found that there are nine areas that typically pose challenges to the CFO and the finance team:

•     Data collection from multiple source systems
•     Over reliance on spreadsheets
•     Currency complexities
•     Intercompany eliminations
•     Multi-GAAP reporting
•     Complex ownership structures
•     Top level consolidation adjustments
•     Multiple reporting requirements
•     Disconnected audit trail of data.business, it usually involves the straightforward closure of books for the accounting cycle, collection of financial data, and generating financial statements for internal management and external statutory reporting."

He recommends the vital points for survival in each area are:

• Data collection from multiple source systems: use a robust solution with ETL (extract–transform–load) capabilities which enables:

1. Integration of source systems with a consolidation solution
2. Importation of data from disparate source systems, including Excel files
3. Pre-defined mapping tables that can be shared where required
4. Data-transformation capabilities such as sign flips (debit vs. credit) and custom calculations

• Over reliance on spreadsheets: “Excel offers a cost-effective solution in the short term. But this approach is neither sustainable nor scalable in the long term.” But don’t just replicate the spreadsheet the files in the Enterprise Performance Management solution

• Currency complexities: install a solution that ensures:

1. the required currency exchange rates, including historical translations, are captured and tracked for items such as equity and reserves
2. logics are in-built to ensure that currency translation adjustments are calculated consistently
3. different buckets store actual data at actual rates, not budget rates, for ease of comparison
4. accounts of a single entity can be translated into different currencies

• Intercompany eliminations: install a solution that is capable of:

1. Properly eliminating intercompany transactions and balances
2. Providing detailed analysis of intercompany mismatches with parties and accounts and any other required detail such as products or cost centers
3. Capturing comments on mismatches
4. Calculating the impact of ownership on such eliminations

• Multi-GAAP reporting: The consolidation solution should help by ensuring a separate bucket is made available to capture GAAP-related adjustments, along with the flexibility to attach relevant documentation justifying those adjustments.
• Complex ownership structures: “The life of the Group Consolidation Manager will be made much easier if all companies are owned fully by the same entity.” The consolidation solution should, “The consolidation solution should thus provide pre-built equity control functionality for minority interest, proportional ownership and equity pickup. Also key is the flexibility to change these ownership structures with varying ownership percentages.”
• Top level consolidation adjustments: Consolidation software can give a better overview of historic adjustments, apart from current-period close adjustments. This makes the close and reporting process faster.
• Multiple reporting requirements: Consolidation solution should cater to capturing all the required details to give the business the ability to do a deep dive of the numbers and generate required reports.
• Disconnected audit trail of data: The right EPM platform should have a detailed audit trail capability, ability to drill down to source/calculations, and task management, built-in workflow, close management, confirmation and certification functionalities, as well as approval and rejection processes.

---

CTMfile take: These are the key objectives for solving the consolidation, close and reporting part of the busy CFO’s life.