Analysis of various consolidation tools.
Let’s look at the broad set of tools used for financial consolidation.
Spreadsheet:
Except, may be, the large companies, all other companies must have toyed with Spreadsheet in some form or the other for financial consolidation.
| Spreadsheet | |
| Pro’s | Con’s |
| Ease of use | Inability to manage Change control, version control, access control, input control, security & integrity of data, logic inspection, segregation of duties and reporting |
Except for its omni present status and ease of use, Spreadsheet is more an individual tool and not standing up to enterprise requirements.
General Ledger:
Most ERP’s provide advanced features i.e. ,multiple books, ledgers, translation etc to manage consolidation within the General Ledger itself. Companies with multiple entities, typically, set up a dummy consolidation entity, export data from other ledgers and initiate the consolidation process. Adjustment entries are made based on the calculation done outside.
| General Ledger | |
| Pro’s | Con’s |
| Build into the General Ledger itself | Most adjustment entries are calculated outside the system and manually entered. |
| Makes import & export of data within the GL simple | Advanced functionalities like inter-co elimination, minority calculation, elimination of capital & reserves are available in Tier-1 ERP’s only |
| Can handle most simple tasks easily | Inability to integrate with multiple systems |
General Ledger based financial consolidation is more suited where all the entities are on the same General Ledger and use a common accounting structure. And it does offer a fairly simple process where suited.
Custom Solutions & Data warehouse:
It is not uncommon to find custom data warehouse based solutions for financial consolidation. Financial and other data is loaded into relational / multi dimensional data storage systems for analysis. Custom codes for calculations and allocations are written and applied.
| Custom Solutions and Data Warehouse | |
| Pro’s | Con’s |
| Purpose built and hence meeting unique needs | Project tends to be more IT owned than business owned |
| Higher customization capabilities | Dedicated skill set required on an ongoing basis to maintain the solution |
| Any number of unique calculations can be created | Can be expensive to maintain |
These solutions are likely to be present in industries with higher regulatory compliances i.e., insurance and banking and unless inherited as a legacy system, will be too complex for common use.
Packaged Applications:
Packaged applications have evolved over a period of time to provide most common solutions on a cookie cutter mode. Today, they integrate with any and any number of systems through ETL’s. They can form the backbone for a Performance Management suite. And being specialized solutions, they are supported for changing global requirements i.e., SOx compliance, IFRS reporting etc.
| Packaged Solutions | |
| Pro’s | Con’s |
| Standard package meeting most global financial reporting requirements | Can be expensive for small consolidation requirements |
| Can integrate with any number of applications through inbuilt or ETL tools incl ability to map multiple accounting structure | |
| Provide comprehensive capabilities for auditing, version control, access control etc | |
| Ideally suited for global multi user environment with multiple layers for consolidation | |
Quick comparison of tools and solutions:
After reading you site, Your site is very useful for me .I bookmarked your site!