Financial consolidation and reporting: Finding clarity in complexity

Financial reporting is a fundamental accounting process that leverages financial statements to unveil a company's fiscal health and performance across specific intervals, typically annually or quarterly. Put simply, it’s a crucial tool for comprehending an organization's monetary and capital standing—revealing where funds originate and more importantly, how they’re allocated. This transparency is indispensable, allowing investors and stakeholders to make well-informed business decisions rooted in the concrete financial realities of the company. 

For potential investors and lenders, scrutinizing a company's financial statements, including the balance sheet, income statement and cash flow statements, is a pivotal step in determining whether to invest or extend financial support to the enterprise. Financial reporting is the cornerstone of transparency and accountability in the business realm.

Financial reporting software is integral to streamlining organizational reporting processes, consolidating data into a centralized database for structured organization and versatile formatting. This includes actual financial and operational results and budget and forecast preparation. However, challenges arise when data is dispersed across multiple spreadsheets or different Corporate Performance Management (CPM) software applications, requiring time-consuming normalization efforts before meaningful comparisons can occur.

The solution lies in centralizing all relevant data—actuals, plans, budgets and forecasts—within a single system with a common set of reporting tools. This consolidated approach facilitates real-time drill-down capabilities for swift analysis and action, crucial for leading at speed in dynamic business environments.

Financial and management reporting takes various forms to meet stakeholder needs. This encompasses:

• Graphical dashboards and scorecards for executives
• Standard financial statements and presentations for board members
• Divisional Profit and Loss (P&L) analyses for line-of-business management
• Profitability breakdowns by product, customer, or channel
• Ad-hoc analysis and scenario modeling capabilities for Finance and Operations analysts

Optimal results are achieved when organizations standardize on a single financial reporting software solution capable of addressing different stakeholders' broad reporting and analysis requirements. This approach ensures more timely and accurate results compared to organizations relying on multiple tools to support varied reporting needs.

In the dynamic and often disruptive economic landscape, CFOs and finance organizations are increasingly required to lead decision-making processes with speed, insight and confidence. Despite this imperative, many finance organizations grapple with inefficiencies in routine processes, particularly in the financial close and reporting cycle, hindering their ability to focus on value-added analysis and decision support.

While the financial close, consolidation and reporting process can be straightforward in smaller enterprises with a single, centralized GL/ERP system, operating in a single currency and possessing a simple legal entity structure, it becomes more complex as organizations grow and evolve. In mid-sized to large enterprises, the financial close involves closing sub-ledgers and general ledgers at multiple locations, consolidating financial results, performing reconciliations, booking tax provisions, producing financial and management reports, and completing statutory reporting and regulatory filings.

As complexity increases, spanning multiple locations and departments with involvement from various systems, the financial close and reporting process demands significant time and resources from the finance team. Most organizations execute this process monthly, with additional tasks and heightened rigor quarterly and yearly. Streamlining this process frees up time and resources and allows for allocation to value-added activities such as analyzing financial and operating results and supporting strategic business decisions.

Efficient financial close and timely, accurate reporting empowers CFOs and finance executives to lead decision-making with the enhanced insight, speed, and confidence required to align their organization with the demands of today's business landscape.

Financial consolidation software stands out as a superior solution compared to alternative methods commonly used in the past. Although widely available and familiar, spreadsheets lack key financial consolidation functionalities, are prone to errors, and lack audit trails. While offering basic features, General Ledger/Enterprise Resource Planning (GL/ERP) systems were not designed to integrate data from multiple GLs, limiting their effectiveness in handling complex consolidation needs.

On the other hand, purpose-built financial consolidation software, a component of modern Corporate Performance Management (CPM) solutions, has emerged as the preferred choice for mid-sized to larger enterprises. These applications are specifically designed to integrate data from various GL/ERP systems, offering advanced financial consolidation features, robust reporting, and comprehensive audit trails. Unlike transactional systems, purpose-built tools provide user-friendly reporting capabilities, automatically generating consolidated financial statements, management reports, dashboards, board books, presentations, and spreadsheet-based analyses.

Historically deployed in on-premises data centers, these solutions are now available as cloud or Software as a Service (SaaS) offerings, making deployment and management more accessible. OneStream's Intelligent Finance Platform serves as an exemplary purpose-built application for financial close, consolidation, reporting, and more, illustrating the effectiveness and advancements in modern financial consolidation software.