4 ways ERPs simplify financial consolidation for multi companies

Published on: May 11, 2021

Compliance with financial regulations and global accounting standards doesn’t have to be difficult for companies with multiple entities. Generally speaking, the challenges most companies face when it comes to consolidating financial statements are negligible if you invest in an appropriate ERP system. Despite this, many companies struggle for years with obsolete manual processes as they believe they’re cutting costs. However, they end up costing themselves an incredible number of labour hours, bottlenecks and errors. They can also increase the risk of non-compliance with global accounting standards and make ill-informed decisions based on inaccurate data.

Software now comes packed with financial consolidation features that help you streamline your processes and enable consistent reporting. This blog will cover the specific ways an ERP system can simplify financial consolidation for your company. If you’re considering investing in an ERP, you should also check out our ERP requirements checklist.

1. Makes auditing consolidated financial statements easier

Financial consolidation pillar pagei

Companies can struggle to audit financial statements from multiple entities when disparate systems produce reports. In this situation, the information generated from separate entities may not match up easily. The parent company will have to figure out how to interpret widely different reports, integrate the data from each entity into the parent accounting system, and begin the consolidation process.

Assuming that there is no need to audit the information, this is already an unnecessarily complex process. Centralized ERPs simplify financial consolidation by allows the parent company to access all entities within a single database to quickly create consolidated financial statements and audit them without the complications of trying to convert files to compatible formats. By simplifying the process for internal and external audits, it’s much easier for the parent company to trace data back to its source and find answers if questions arise.

2. Simplifies the number of costs you face over time

A centralized ERP environment is an investment and needs to be treated as such. Some companies may balk at the initial start-up costs, but this is a short-sighted reaction to a solution that will save your company time and money for years to come. It’s not uncommon for consolidated financial statements to take weeks to compile if you’re using decentralized systems that don’t integrate properly. In contrast, a suitable ERP can reduce the labour hours to mere hours.

It’s also likely that each of your entities uses an ERP or accounting system of some kind already. If these systems are all separate, you’re spending a lot on the maintenance, support, licensing fees, and upgrading of each system over time. All these costs can quickly add up as you scale. In contrast, centralized systems will cut this down significantly and simplify your billing so that you can easily monitor expenses.

Recommended reading: Financial consolidation for multi-companies (FAQs answered) 

3. Reduces the risk of non-compliance and increases data security

Navigating compliance | common financial consolidation challenges

When you’re transferring reports and sensitive information between multiple systems, there’s a high risk of a data breach. It’s rare for a week to go by without a security breach of some kind occurring in the business world. Despite this, many companies are still pretty lax about the security of their data. When it comes to those with multiple entities, you should simplify your security requirements by centralizing all data in a system that can withstand cyber threats.

Complying with accounting standards like IFRS 10 and ASC 810 is crucial to the scalable growth of any company, and non-compliance can present considerable risk. A centralized ERP built to manage the demands of financial consolidation will reduce the risk of non-compliance as your team can rely on the reports and data. Data leaks and non-compliance are both significant risks that may result in hefty fines and penalties, so it’s safe to say that investing in a solution that tackles both will simplify financial consolidation considerably.

4. ERPs simplify financial consolidation by boosting productivity and increasing collaboration

It’s no secret that ERP systems increase both productivity and collaboration. By cutting down the amount of time spent inputting data manually and consolidating information from disparate systems, your accounts team will be free to focus on different types of tasks.

Many managers report that their teams find it easier to collaborate and perform tasks without hesitation and stalling. Teams will usually find they can address more exciting projects and work on strategic growth opportunities. Most people find this kind of work more satisfying, boosting their overall productivity and performance.

starboard group case study financial consolidation multi-company

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