How Cloud Financial Solutions Are Changing Financial Consolidation for the Better

The finance industry is quietly changing for the better. At the center of this change are cloud financial solutions that make it easier for businesses to execute financial consolidation. The nightmare of dealing with disorganized spreadsheets and cross-department email reconciliations is history. Today's finance departments are adopting cloud-based systems that increase the speed and precision while providing transparency to one of the most complicated processes in accounting.

CFOs and financial managers struggling with the quarterly consolidation cycle will be amazed by how much easier the process now is. Advanced cloud financial solutions not only streamline the dull number-crunching tasks, but also give real-time visibility of operations across the globe, transform consolidation into a strategic opportunity rather than just a mundane task, and securely store data in the cloud. In this case, technology is a boon for financial reporting.

Challenges of Traditional Financial Consolidation

The challenges of traditional financial consolidation are all too familiar for finance professionals. It begins with receiving a collection of spreadsheets from different business units in varying file types; the data is inconsistent from unit to unit. A resource will then ‘merge’ the spreadsheets together over a period of days to weeks, checking for errors, making corrections for inter-company transactions, and a multitude of other tasks only to realize that there are discrepancies that require a do-over.

These manual processes create numerous headaches. Controlling versions becomes a hassle. Dealing with currency exchanges and local accounting rules adds even more layers of difficulty. More often than not, by the time the reports are prepared, the data is usually out of date. This is where cloud financial solutions come in to change what has traditionally been one of the most painful processes in finance.

How Cloud Financial Solutions Simplify Consolidation

Modern cloud financial solutions tackle financial consolidation using a different methodology. While emailing files is a tradition across industries, regional controllers can enter numbers directly into the system using pre-defined templates stored within the center system. Access to pre-defined templates increases efficient input of financial data while automated checks for completeness and review flags ensure accuracy before consolidation begins.

An automated intercompany reconciliation feature allows the system to calculate and compute inter-company transfers without human interaction. A huge chunk of time spent arguing over why one division’s receivable does not match another division’s payable is eliminated as entities transact in real-time with systems designed to automatically match transactions. For international companies, integrated mechanisms convert currency at prevalent rates according to the needs set for each report bilge.

Most importantly, the systems keep track of all modifications made during the financial consolidation process. This openness is very helpful for external audits and for the finance teams when trying to explain how they reached the final numbers.

Reporting in Real Time and Continuous Consolidation

Consolidation occurs on a periodic basis, be it monthly, quarterly or even yearly, which creates Cloud financial solutions. These cloud solutions allow for a more continuous approach to financial consolidation. Instead of reviewing data in one frantic rush during a stressful period, numbers can be checked and modified throughout the reporting timeframe.

Management does not receive static snapshots anymore. Rather, they are provided with dynamic views that are almost real-time shifts in performance. Finance teams have the ability to look into the finance units and resolve any issues way ahead of time, unlike with older strategies.

Need various different scenarios for one report? Modern cloud financial solutions also allow for these. Need to see consolidated results both with and without a recent acquisition? Or need new results calculated with and without a certain methodology? These systems eliminate the need for spreadsheet remakes and complete restructures.

Collaboration without Chaos

One often overlooked advantage of using cloud financial solutions for financial consolidation is how they enhance teamwork across finance departments. With traditional processes, only a limited number of people can work on consolidation files at a given time due to version control issues. With cloud platforms, multiple users can work concurrently and still maintain data integrity.

With the commenting features, collaborative discussion on changes and adjustments can be done within the system instead of back-and-forth emails. Workflow tools ensure that all necessary approvals for each step are processed before final numbers are frozen for reporting. Since everything is online now, regional controllers can enter data according to their local time zones without waiting for the head office to send the files.

This type of environment helps teams achieve a significant reduction in time spent on the consolidation process as well. What used to take weeks now takes, in many cases, merely days. This change frees up finance teams to spend their time performing analysis rather than gathering and cleaning data.

Compliance and Control in the Cloud

Some finance executives are not as eager to adopt the cloud for financial consolidation because of how the cloud impacts data security and compliance. Modern cloud financial solutions tend to offer more sophisticated controls and audit capabilities than most on-premise systems, so these concerns are often unjustified.

The best platforms have strong security policies that restrict access to sensitive information based on a user's role within the organization. Detailed logging tracks every change made during consolidation e.g. who, when and why it was done. For public companies, these systems help enforce segregation of duties and maintain the internal controls prescribed by law, for example, Sarbanes-Oxley.

Cloud technology makes complying with changing accounting policies easier. With the rise of new financial consolidation rules like revenue recognition and lease accounting, rule changes are automatically pushed rather than requiring expensive system overhauls. This allows these firms to remain compliant without hiring additional staff to manage their software.

Flexibility for Expanding Businesses

As companies evolve, whether through organic growth or acquisition, their financial consolidation requirements grow in complexity. These newly added business units bring additional data sources and intercompany transactions which increases opportunities for mistakes. The old methods that were once effective for small scale businesses tend to fail as the business grows.

Cloud financial solutions grow along with the business. Adding a new subsidiary to the consolidation documents is sometimes only a few clicks away instead of reconstructing spreadsheet templates. Automated systems manage the added workload without any drop in system speed. This is one of the most useful aspects of cloud platforms for the mid-sized companies looking to grow or large very complex enterprises.

Organization's growth, whether entering new markets or launching new product lines, where many hats at the same time, which is why they can effortlessly add new dimensions to their consolidated reports without any additional work. It protects the company from outgrowing the technology that was invested in.

Integration with the Multinational Finance Ecosystem

Every finance department has its own set of tools: ERP, payroll systems, billing tools, and others within a single cloud financial solution. The best cloud financial solutions for consolidations do not only serve as separate modules but also cross functions by combining with other tools, pulling in source documents instead of exports and imports.

Integrated systems eliminate entire categories of errors that traditional, non-automated consolidation processes suffer from. If the general ledger changes, the consolidation system changes automatically in real-time. There are no obsolete numbers from importation forgetfulness.

More and more, these platforms use A.I to detect anomalies in the data. The system may flag a division's figures which differ greatly from what's considered normal in historical trends or expected relationships between metrics. These intelligent alerts assist finance teams in directing their reviews to the most critical areas.

Making the Transition to Cloud-Based Consolidation

For organizations thinking of shifting their financial consolidation to cloud-based solutions, the transition is challenging but very rewarding. The first step is cleaning up the existing chart of accounts and entity structures to achieve organization-wide uniformity. This foundational work reaps benefits irrespective of the technology employed.

Pilot programs can help instill confidence in the newly adopted methods. Many organizations run parallel processes—performing consolidation the old and new ways for a quarter or two until they gain confidence in the system's outputs. This gradual approach enables teams to resolve any challenges before full adoption of the cloud platform.

Training is just as important. Although modern cloud financial solutions are created to be user-friendly, they provide a different method of working. Investing in training makes sure that all team members are able to utilize the system to its full potential and not just perform outdated processes in a different setting.

The Future of Financial Consolidation

As cloud financial solutions advance, financial consolidation will be increasingly seamless and richer in insights. Early adopters are starting to implement predictive analytics that estimate future consolidation outcomes from current data trends. Eventually, block chain technology could automate a large portion of the intercompany reconciliation with smart contracts.

The systems promise to shift the paradigm of consolidation from being a merely compliance-driven exercise based on historical data to a more strategic forward-thinking tool. Less time spent by the finance teams in gathering and validating data allows more time to delve into analyzing the numbers and strategizing for the business’s future.

If you’re a business that hasn’t looked into new cloud financial solutions for your financial consolidation, it’s about time you did. Organizations that have mastered the art of closing their books first, accurately reporting, and deriving strategic insights are way ahead of their competitors. In this day and age, having these capabilities is critical for making smart decisions and being successful in the long run, not just for luxury.