The liability of legacy systems: Is your financial consolidation process obsolete?

By Nick Nesbitt | 27 March 2017

Nick Nesbitt - Managing Director, Tagetik UK

As Gartner points out in its IT Market Clock for Financial Management Applications, stand-alone financial consolidation causes significant reporting problems for executives and management teams. Although it produces consolidated financial data, its separation from other BI and management reporting capabilities causes inconsistency between finance and operational data. This makes it virtually impossible to identify which operational factors are driving financial performance, leaving companies facing the risk of not being able to future-proof their finance function.

So, what do businesses need?

In one word? Unification

Data in older, stand-alone financial consolidation applications is integrated with other systems but this is typically limited to moving financial data at the beginning and at the end of the process, which is slower and less accurate because planners don’t have the latest actual data at their fingertips.

The approach that makes most business sense is automation and investing in a robust, unified corporate performance management (CPM) platform, a solution that unifies consolidation, budgeting, planning, forecasting, disclosure reporting and analysis in a single interface, a single database and a single server across all of these processes.

A unified CPM suite can replace the company’s fragmented legacy solutions, modernise and unify key financial processes, as well as comply with accounting and regulatory standards. It provides one single version of the truth simplifying all CPM processes and rationalising the data collected for budgeting, planning, reporting, forecasting and for financial consolidation.

Innovations like in-memory technology and responsive design for mobile devices increase the speed of loading vast amounts of data, performing complex consolidation rules and calculations, running new projections and forecasts based on the latest actual data and providing the results to those who need the data to make business decisions. Ultimately, implementing a stand-alone CPM solution reduces the time needed for the entire consolidation process and the overall costs because, in the end, a single system is less expensive to maintain.

Your total cost ownership is made of visible costs like software licenses but also of invisible costs like training, maintenance, customisation, implementation, IT personnel and more. By upgrading to a unified CPM platform you’ll reduce the cost of ownership of your IT investments which will eventually result in higher RoI for your company. Finance can focus more on analysis and providing insights with confidence because all the data is coming from the same source. As a result, much more time is spent on running the business and less on running the financial systems.

Finance-centric or business-centric?

Legacy consolidation solutions were designed to be used by finance only, specifically for financial consolidation and financial reporting.  They are not easy to use and do not feature self-service analysis, graphical workflows and KPI dashboards.

Yet, financial data is an asset for driving future performance, not just reporting on current performance. It must be accessible not just to finance but also to business decision-makers across all divisions who require a more intuitive user interface than the typical financial analyst. There is no question that financial consolidation requires sophisticated calculation capabilities and financial intelligence. Newer systems are end-to-end solutions designed to be controlled by finance but used by all functional areas and executives, enabling them to be more proactive and strategic.

Customised or configured

Legacy consolidation applications were not devised to support the diverse requirements of today’s finance function. Nor do they provide the analytics and dashboarding that decision-makers need to take full advantage of the valuable information these applications produce.

As a result, legacy technology often requires significant customisation which, on top of potentially being costly and risky, involves using a lot of IT time and resources.

However, customisation can negatively impact performance and make control and auditability of the data and financial processes harder. Modern consolidation solutions are designed to support more than traditional consolidation and financial reporting. They are extendable to provide for new requirements without the need for customisation or coding. Finance should be able to configure the consolidation solution to address new requisites without programing or scripting and without resourcing external consulting firms or IT. Unified solutions have built-in workflow and audit trails and their own analytics and dashboarding. They have automated integration with corporate BI and include diagnostic checks and automated validation that ensure the data is accurate and traceable from source to final reporting and disclosure, including all the changes that occur along the way.

Insular or collaborative

Many tasks performed in the consolidation and reporting process are serial and could be done simultaneously if collaboration capabilities are in place. However, legacy consolidation systems simply weren’t designed to facilitate collaboration within finance or between finance and the rest of the organisation. Collaboration often happens by email or other non-centralised external tools so visibility into status and accountability are limited. This slows down the entire close process and makes it difficult for the finance team to understand what – or who - is causing bottlenecks or delays.

Modern consolidation solutions facilitate collaboration because they have a single version of the truth in a single system for actual data and forecast data too. This allows everyone involved in consolidation, close, planning and reporting to focus on collaboration rather than debating whose numbers are correct. Additionally, graphical workflow and embedded collaboration tools mean that everyone knows who they need to collaborate with and provides full visibility across all processes and activities that are being collaborated on. People are enabled to work together and their collaboration is tracked from start to finish so everyone is on the same page and nothing falls through the cracks.

Auditable and actionable

While we are on the subject of tracking, legacy consolidation technology focuses exclusively on ensuring an accurate consolidation of financial data and generation of auditable consolidated financial statements. It is often difficult to trace data from the original source to the final financial statement. Customisation and the use of external spreadsheets help address some limitations of older applications but these can cause holes in the audit trail and with limited or incomplete audit trails, the finance team ends up spending much more time tracking down answers to questions from the CFO for instance, and compiling information for the auditors from multiple sources.

Having all the data in one place allows for an automated workflow and audit trail of every change made, including the original figure, who made each change, when they made it, why they made it, who approved it etc.

The ability to automate the generation of financial statements, board reports, earnings presentations and regulatory submissions from the same trusted source without replicating the data is becoming increasingly important because of the sheer volume of data and the breadth of compliance requirements.

Some modern consolidation solutions build security, access, collaboration and workflow into tools like Microsoft Word and PowerPoint that are directly linked to the consolidation solution. This way, last minute adjustments are automatically reflected in every report and presentation. This significantly streamlines the process and reduces the risk of errors or inconsistencies across multiple reports.

Conclusion

Automating tactical, manual tasks will make your finance team more strategic and engage the rest of the business not just in consolidation but in multiple finance processes and reporting. It is time for businesses to review their strategy for financial consolidation and develop a plan that makes an upgrade or replacement part of a broader CPM strategy. 

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development