Every day, companies make decisions based on the data they collect. Most of us have a sea of data at our fingertips—whether we need customer information, transaction data, or marketing metrics, the likelihood is a wealth of data is available. So why then do so many companies struggle to use data effectively?
One of the significant challenges of financial consolidation is understanding whether or not the data is trustworthy and can be relied on to make critical decisions—a challenge that is particularly relevant for companies scaling quickly and adding multiple entities.
A study by Gartner found that poor quality data costs the average organization $9.7 million a year and the U.S. economy $3.1 trillion annually. This blog explores why poor data management ends up costing multi-companies, and the most effective solutions for data management strategy in financial consolidations.
Why does poor data management cost multi-companies so much?
Data is central to how we do business, yet many can fail to consider its effective management. Often, information is sourced from so many disparate systems that it can be impossible to consolidate it or obtain a single source of truth.
A situation is further complicated as companies acquire new entities and scale operations. Often the amount of data to manage escalates considerably, and unless the suitable systems are in place can end up being mishandled.
For instance—in the case of mergers and acquisitions—it’s common to see bottlenecks arise due to crucial data being pulled from incompatible systems and manually inputted to a parent system. This sort of process results in data riddled with errors as a result.
Data management is crucial to your company’s success, particularly when it comes to the sensitive financial information required for financial consolidations. Companies simply cannot afford the risk of poor data management. It can lead to significant bottlenecks, stressed accounting teams trying to align various financial reports, and non-compliance with government fines resulting in hefty fines (to name just a few of the ramifications).
Good data management | The 7 standards of reliable data
Poor data management is possible to fix. Often it will require your company as a whole to look for ways to align various entities and subsidiaries to ensure that financial consolidation is possible. It’s easy to identify where issues with data management arise. To build an effective data management strategy, you will need to audit your current data first, then make sure all new data meets the following standards:
- Extracted from a credible source
- Accurate and free from error
- Complete and comprehensive
- Consistent across all systems
- Standardized format
- Collected on time
- Current and relevant
Recommended read: 4 ways ERPs simplify financial consolidation for multi companies
Security concerns when it comes to data management for financial consolidation
Poor data management can cause significant security concerns for companies consolidating financials. Transferring data between various entities and systems can weaken security measures and introduce the risk of data breaches. If you’re interested in learning more about the security issues that multi-companies face—particularly mergers and acquisitions—you should check out our blog on the four common security issues they face.
Companies must be vigilant when consolidating data from various entities, often leaving sensitive information vulnerable to cyber-attacks if data is transferred between multiple databases. With stories of data breaches and their significant penalties making headlines, no company is immune to the risk posed by cyber threats.
Centralizing data management is the key to secure financial consolidation
A study by Bloomberg found that over 40 percent of respondents expected centralized, cloud-based technologies to be one of the most significant drivers of change in data management. By opting for centralized data management, you accelerate financial consolidations and decision-making processes, aligning all entities in a single database. However, not all solutions are created equal. You must look for the six essential financial consolidation features when investing in new software.
6 essential features of financial consolidation software:
- Centralized environment for intercompany transaction processing
- Financial consolidation software should exist in the cloud
- Real-time consolidated reporting
- Enables comprehensive compliance management
- Scalable security features to ensure the protection of all data
- A customer service team and comprehensive training to enable smooth implementation