3 Steps For a Successful Financial Consolidation Project.
Is your organization currently using excel for consolidation and planning to transform it into a system-based consolidation process?
There are 3 key steps that should be completed before embarking on a Financial Consolidation project for your legal and management reporting.
Key Benefits of automating your consolidation process are
- Trial balance data collection from the subsidiaries with mapping from subsidiary COA to Group COA on time.
- Automated Intercompany Elimination Process and Tracing the differences would become easy.
- Centralized Monthly, Quarterly, Yearly Schedules and Notes to Accounts by subsidiaries
- Automated Currency translation and handling of Translation reserves.
- Automated calculation of minority interest and impact due to the change in subsidiaries nature due to control of ownership.
For your consolidation project to be successful and realize the true value of automation, follow these 3 steps
1. Availability of right intercompany transactions in your ERP software.
The first thing that you must look at is the quality of data from the ERP Systems managed by your subsidiaries. So far, you would be getting the data by summary level from your subsidiaries for your group consolidation. When a system is going to be in place, you will start getting the TB by detailed GL Account. We noticed key issues in the data from ERP system for e.g.,
- The intercompany partners posting may not have been enabled.
- There is no control check to confirm whether Intercompany accounts are paired with intercompany partners.
- Third party accounts tagged with intercompany partners.
Why right Interco transaction details are important:
How does a system auto elimination work? The system looks for a common parent for the Interco transactions to be elimination based on the intercompany partners. So, any intercompany transactions must have an intercompany partners tagged to be picked up in the auto elimination. If this information is not available or tagged correctly, the system cannot do the elimination and it will require you to do journals.
What can you do?
- Data validation exercise to make sure your data from ERP supports the logics for the elimination you are trying to achieve
- Clean up exercise in advance before the kick-off of Consolidation Project.