4 Hidden Costs of Legacy Financial Consolidation

Why scaling your closing and consolidation process can’t wait

For many, financial consolidation is a process that simply exists. We don’t refine it. We don’t mess around with that. We are not looking to innovate. We believe we have what we need, even if the process isn’t ideal. (The phrase “If it works, don’t fix it” comes to mind.)

What if we told you that outdated consolidation processes are costing you more than time? In this white paper, we’ll expose the unexpected ways that traditional consolidation methods drain your resources (financial, operational, and human) and explain why an end-to-end solution, automated consolidation strategy is the key to unleashing the insight-generating potential of consolidation – and finance.

In this white paper, you will learn:

  • The key indicators of an expensive consolidation process
  • Why we ignore critical consolidation updates
  • Four Cost Losses of Legacy Consolidation Systems
    • Errors in financial statements
    • Human resources consumed by menial tasks
    • Decision making without data
    • Tied to the office in a virtual world
  • How evolve the financial close and consolidation with automation

Key indicators of an expensive consolidation process

How do you know if your financial close and consolidation process is slow and wasting resources? Have you felt one or more of these pain points:

  • Extremely slow data processing
  • Inability to easily update the system for the latest organizational change
  • Your monthly or quarterly closing takes longer than six days.
  • You haven’t replaced your consolidation software in the past 11 years.
  • Your system requires high levels of customization
  • Your closing and consolidation software is divided into point solutions

If you see these diseases reflected in your consolidation process, we will tell you now, they are not insurmountable. All it takes is a little automating radically reverse this process.

Now let’s look at the four underlying costs of a legacy consolidation system.

Cost 1: Errors in financial statements

Misstatements most commonly arise when information systems fail to accurately capture business transactions or when financial reporting processes are not sufficiently aligned with the requirements of the applicable financial reporting framework. The consolidation process is expensive at best, and massively flawed at worst. It’s risky. These are the internal tax controls. This makes audits incredibly difficult. After all, it’s pretty easy to hide a misplaced figure when you’re blind to the spreadsheet after a day of zooming 150% in Excel.

Ask yourself: are these costs what you are willing to incur?

Cost 2: Human Resources

The cost of human resources swallowed by the legacy consolidation system overlaps like an onion. First, there’s the obvious top layer: lengthy manual consolidations require someone – or a few – to oversee the process. Closure and consolidation is an efficiency and cost issue and quickly turns into an HR issue that could cost your organization dearly in terms of turnover, retraining and talent. Then, to continue the onion analogy, there is the most visible layer of human resource consumption: IT. Legacy consolidation systems overwhelm systems management IT departments.

The more you automate, the freer your staff is to focus on the critical, value-driven aspects of their work.

Cost 3: Decision making without data

The executive suite has come to see finance as a strategic business partner. Meanwhile, finance is still learning to juggle its new roles of data steward, data interpreter and, more recently, data prophet. And yet, if you cannot be confident in your consolidation, how will you ever be confident in your analyses, reports or recommendations? Closing and consolidation are the base from which all other financial processes branch out. This means that late, isolated, poorly systematized close and consolidation software eats away at the success and impact of all other processes.

In his heart, closing and consolidation is a data management problem. Implicitly, this is a large part of the parsing problem. Without integrating the close and consolidation process with the rest of financial management, you will continue to experience data management issues that hinder your ability to trust your data, reports, and decisions.

Cost 4: Tied to the office in a virtual world – or agility

The digitization of finance has long been touted as an upcoming trend, but the pandemic has pushed it into an urgent action point. If we can’t access our financial systems in a remote environment, how can we complete our financial processes from home? While the future is in the air, one thing is certain: critical and repetitive processes, such as closing and consolidation, must be virtualized.

Evolve Financial Close and Consolidation with Automation

Old consolidation systems cost you more than the comfort of using them is worth. It’s time for the finance office to evolve from the bottom up, starting with the close. Only then can we realize our potential as a forward-thinking, data-centric and strategy-driven service that decision-makers rely on. While we all have our eye on alluring technologies – like predictive analytics and forecasting – we must remember that in order to use these technologies you need to have a solid base of consolidated data and the human resources available to analyze the results. And that is precisely what automated closing and consolidation promises. An accelerated process that streamlines business data and empowers Finance to do what we do best: understand the numbers.

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