The role of the CFO is arguably more important than ever. The modern CFO must act not only as a financial expert but also as a strategist and business leader.
This means the CFO at a growing company has to walk a fine line. The day-to-day duties of the office of the CFO involve a balancing act between providing insights for business decisions and handling the minor details of each and every financial transaction.
As a finance professional, it can be easy to get bogged down by the little things. Fundamental processes such as financial reporting, consolidation, and account reconciliation are important but can distract you from the bigger picture of sustaining growth and spotting changing market trends.
For some finance departments, the month-end financial close process can take up to a week or more. As a result, accelerating the financial close is a top priority for many CFOs seeking to focus more on strategic planning. Let’s take a look at how you can streamline your close process by creating consolidated financial statements faster.
Consolidated Financial Reporting
Although the term financial consolidation can sometimes be used loosely, consolidated financial statements are explicitly defined by the Financial Accounting Standards Board (FASB). The FASB defines consolidated financial statements as the reporting of an organization structured with a parent company and subsidiaries as a single company. This gives shareholders and creditors of the parent company a more meaningful and fair assessment of the organization as a whole.
Private businesses have few requirements when it comes to consolidated financial statements, but publicly traded companies are required to report their consolidated financial statements in line with the FASB’s generally accepted accounting principles (GAAP).
Why You Should Improve Your Consolidation Process Flow
Financial consolidation is clearly crucial for both regulatory and operational reasons. Global organizations need the financial information of each region, branch, and subsidiary aggregated to comply with local and international regulations and to give insights into the company’s financial standing.
But the process of creating consolidated financial statements can be a slog. Traditionally, financial consolidation has been a manual and tedious task performed using complex spreadsheets for each branch or subsidiary. And for large international corporations with multiple general ledgers and financial planning systems, the process can include collecting and organizing data with different currencies and accounting practices.
Here are a few reasons why streamlining your consolidation process can take a load off your finance team.
Time frames are shrinking
In today’s global business environment, financial regulations are ever changing, and the requirements are increasingly detailed. The end result? Financial teams have more to do and less time to do it.
And in addition to regulatory concerns, companies need quick access to accurate, up-to-date financial reports if they hope to stay competitive. Updated financial figures should be reported at least once a month to management to be consolidated and compared with budgets and forecasts.
Improving your consolidation and reporting process can bring your team significant time savings, cutting down hours and even days from your close cycle.
Companies are looking to cut spending
This may seem like a no-brainer, but saving time means saving money. The global economic landscape today is characterized by change and uncertainty. As a result, businesses are constantly looking for ways to improve their bottom line through cost reduction.
Operational costs are usually the first item on the chopping block. By making your financial consolidation process faster, you can realize significant savings for your company.
Strategic thinking is key
The financial close process is important, but it can take weeks if your procedures are outdated and slow. So it’s not exactly surprising that the average finance professional spends nearly half their time on simple, repetitive tasks. However, this means less time for strategic thinking and planning.
Updating your financial consolidation workflow will speed up your close process and free up time for you to pursue more impactful strategic planning.
Financial teams risk burnout
CFOs often have relatively small teams, yet they hold a huge amount of responsibility within the company. Aside from financial reporting, closing the books, tax provisioning, and annual budgeting, CFOs and their teams are now tasked with supporting decision making that can influence the direction and future success of the company.
This means financial teams face higher burnout rates than other departments. Streamlining your consolidation process can reduce the workload for your finance team, preventing burnout before it takes hold.
Bad processes are prone to error
Poorly designed processes that rely on manual data entry are not only slow, but they’re also prone to error. Updating and improving your consolidation process flow will help your team reduce errors and generate consolidated financial statements that are more accurate.
Ways to Close Faster
Making improvements to your financial consolidation process will save your company time, money, and worker burnout. Here are four ways you and your finance team can upgrade your consolidation process and close faster.
1. Train your team on consolidation
Implement training to keep your team informed about best practices. Internal training represents a powerful tool that can bring more benefits than off-site training and seminars. It reinforces your organization’s specific culture while addressing relevant, on-the-job problems and challenges.
Effective internal training for the consolidation process can also reduce the dependence on specific employees while creating an environment that promotes knowledge sharing and documentation.
In addition to in-person training, consider establishing an easily accessible document such as a wiki or Google Doc to collect your team’s procedures, policies, tips, and tricks for the consolidation process. This will not only speed up the end-of-month financial close, but it will also ensure consistency and make onboarding new staff easier.
2. Simplify data collection
Simplify the way your team collects data by eliminating the need for manual data collection from many separate sources. Cloud-based tools can automatically update and share your company’s financial data across multiple systems.
3. Streamline your reconciliation process
Another way to close faster is to streamline your intercompany reconciliation process. Reconciliation is a part of the consolidation process and ensures that all sets of financial records are consistent and in agreement.
However, this is another task that can be time consuming if it’s not optimized. But the good news is that a bit of organization at the reconciliation step can also save many hours during your month-end close cycle.
Once again, automation is indispensable. Automated cloud-based solutions for storing financial data can improve data integrity and reduce the need for complex, manual reconciliation by allowing everyone on your finance team and within the company at large to work from the same numbers.
4. Embrace innovation
A common theme you may have noticed is that modern technology can go a long way toward improving your consolidation process. So embrace innovative new technology and don’t be afraid to adopt new tools.
If CFOs and their teams hope to make informed strategy recommendations, they need accurate, actionable financial data. In this case, modern technology is essential.
Cloud-based tools let you share your company’s financial data across all of your systems. Moreover, you can access the data anywhere, anytime, on any device.
Automation eliminates the need for manual data entry, number crunching, and reporting. This frees up precious time while delivering real-time insights.
The process of creating consolidated financial statements represents a key function for the office of the CFO. But if your team is still doing everything by hand, generating monthly consolidated financial statements slows down your close cycle and serves as a distraction from strategic planning. By adopting better processes and modern tools, you and your finance team can save hours and even days every month.
Looking to free up time by shortening your close cycle? Longview can help speed up your consolidation process with a unified and easy-to-use plug-and-play solution. Longview Close automates your processes while improving accuracy, allowing you to close your books faster. Spend more time on deeper insights and making strategic, data-driven decisions with Longview.
Shorten your close process, improve accuracy, and make better decisions with Longview Close the NextGen Consolidation solution.