3 Steps to Efficient Financial Consolidation

Financial consolidation is a hot topic in the world of finance. If you are a CFO you will exactly know what it means (or do you?). If you are just interested in finance or are working in a small business and got some finance responsibilities, here what it is. Financial Consolidation means, well it has a lot of meanings in different contexts. One being debt consolidation, in this context it could mean for example you could have a couple (or more) credit cards, so instead of paying each separately you take an overarching loan and pay off all your credit cards leaving you with only having to pay off your loan (so one single payments instead of multiple).

In business it also could mean a merger between companies – bringing their finances together creating a new entity. Well what I would like to talk about today is really something totally different from the two examples above- it is about bringing together all your financial systems within a company into one Financial Consolidation Software. So this means, instead of having to deal with load of different financial software – integrating them into one.

But let’s say you are a SME and you have now realised that your financial management has become a little drain on resources, due to all the different software/platforms you got to access and update. How would you go about efficient financial consolidation? Well, here some steps that could just answer this question for you, and help you along the way!

To cut to the chase, there isn’t a fit for all when it comes to automation. This is because consolidation needs will vary significantly from company to company. Well, this means that your first step is to understand your needs and match the functionalities you are looking for against those. Another important point is to know your current process inside out – if you do not know what is currently happening – how will you be able to automate it? You should do this before even considering looking at different consolidation providers. If you start looking at existing packages, you might start to try and fit your needs into an off the shelf product. In fact, you might actually not be able to fit all your needs into one system and might need a second one to work alongside. So, focus on your needs, then look for a solution. Things you might want to consider are: COA (charts of accounts – a list of all accounts), fiscal calendars, are you dealing with different currencies, what are your reporting needs. Try to cover as much as you can. Once you have your list you can then go on and do some research and find some suitable providers.

I know it might be a hard thing to do. For a financial person it might be almost like asking them to break up with their other half. But believe me, if you want to automate and make things more efficient you will have to part with your old friend Excel! Do not mourn the loss; you will hopefully gain a new friend. A friend that will make your financial life easier and fulfil all your needs! Why you got to get rid of Excel, well it isn’t really a great consolidation tool. You can’t collaborate properly (this is really important if you got different departments working together, or different parts of the company). Plus Excel is prune to issues and mistakes. This is mainly due to formulas. You might not even realise that you got an issue with a formula because your spread sheet is just that big. If you have a system in place that allows collaboration, people can start signing off things like i.e. expenses within the system, it also will allow for comments etc. It will cut out a lot of the admin that goes with maintaining an Excel sheet and getting people to look at it and sign off certain things. It will improve visibility and help you keep to your rather tight schedules each month.

So, why not make your life a little bit easier – and turn your back on your old friend, don’t look back and keep moving.

So you know your needs, you know your requirements, you have mapped out all the steps that your new software needs to cover, you have researched some suppliers? Yes? Well ensure that you do not base your decision solely on price. Your perfect financial consolidation software might not be the cheapest but ticks all the boxes (or at least most of them). Regard it as a long term investment; make sure it is adaptable, so you can customise it. Plus if it is a little flexible you do not have to be worried to go through the same processes again in a few years down the line because your needs changed slightly. One very important point is – do not wait too long! What I mean is – do not wait until your current system becomes just too painful, or not manageable. The longer you wait the more complex and difficult it becomes to migrate all your data. A good time to consider a system to consolidate your finances is when you realise the company is growing rather rapidly. Do not let it get out of hand, plan in advance! Another hint is when you actually do not understand your own spread sheet anymore, because it just gotten big and crazy!

Well another important point is making sure that once you got the software you are not just left to your own. Ensure you got after sales service and system maintenance from the vendor. It might be that for a specific time that service is free – but you might have to pay at some point for it – so factor in those costs.

Thanks for reading! I'd love to know what you think so please feel free to comment. Also, make sure you check out the rest of my work on Instructables. I would especially recommend "Taking Care Of Your Elderly Relatives: What Are Your Options?".

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