In most globally-expanding organisations, with multiple regional ERP systems, financial consolidation poses a major challenge. Due to the nature of acquisition and multiple outstation operations, financial consolidation relies mainly on Excel spreadsheets with inaccurate data, leading to non-compliance.
The Analysis Phase
When choosing your flavour of financial consolidation solutions, it’s important to undertake a thorough analysis of the organisation’s current state and what’s required. Here are a few guidelines on what to cover during the analysis phase:
| Assess Current State | • Conduct a comprehensive assessment of the current financial reporting processes, systems and data sources. • Identify strengths, weaknesses, and pain points in the existing financial consolidation approach. |
| Stakeholder Analysis | • Identify and engage key stakeholders(regional and Group), including finance teams, IT professionals and end-users. Understand their needs, expectations and concerns regarding the existing financial consolidation solution. |
| Data Sources and Integration | • Analyse the variety and complexity of data sources across different regions. • Assess the requirements for data integration, transformation, and mapping to ensure consistency and accuracy in consolidated financial reporting. |
| Technology Infrastructure | • Examine the organisation’s existing IT infrastructure and assess whether any upgrades or changes are necessary. |
| Security and Access Controls | • Analyse the security measures and access controls needed to protect sensitive financial information. • Ensure that the financial consolidation solution complies with data security standards and regulatory requirements. |
| Risk Assessment | • Identify potential risks associated with the implementation, including technical challenges, data cleansing/migration issues and user adoption hurdles. |
Possible Architecture Options
| Options | Pros | Cons |
|---|---|---|
| Best-of-Breed Cloud FCS Financial Consolidation Service | • Automation of complex processes e.g. Intercompany eliminations. • Pull financials from multiple ledgers and other source systems. • “Single source of truth” for financial data. • Self-service operating model, owned by finance/accounting team with very little IT admin. | • Rolling out software across a large organisation. • Require financial professionals to learn new things, which can be time-consuming, expensive and sometimes met with resistance. |
| Global Cloud ERP A single global ERP is used to manage all business units worldwide. | • All the data in one place acting as a single of truth. • Return on investment of just-in-time purchasing and the corresponding reduction of inventory carrying costs can justify a single-instance ERP project. | • Slow to grow and expand a business. • The cost to convert to a single ERP is prohibitive. |
| Blockchain-Based Solution Blockchain technology can be leveraged for financial consolidation to enhance data integrity, transparency, and security. | • Immutable ledger for transparent and auditable financial records. • Enhanced security features. | • Complexity in implementation. • Limited adoption and industry standards. |
| General Tools Spreadsheets & Data Warehouse | • The simplest solution to implement. • Users familiar with Excel UI and functionality. | • More user intervention leading to potential errors in data. • Changes could affect the underlying transaction and extract, transform and load (ETL) processes—and determining these effects takes time. • Does not promote the concept of autonomy and self-service. |
Logical Architecture
At a high-level, a best-of-breed solution may look something like this:
Where organisations are considering transitioning to a global single-instance Cloud ERP solution, the financial consolidation and reporting solution can help with the transition to cloud ERP by providing consistent processes and reports during the transition period. Also, in a post-Cloud ERP world, the FCS compliments the ERP service.
