Reasons for group consolidation
Group consolidation is not something everybody chooses to do. But when companies do it, it is typically to achieve the following benefits:
- Improved financial reporting: Consolidation helps provide a clearer picture of the financial performance of the entire group, which is helpful for stakeholders.
- Increased transparency: Bringing all entities under a single financial report makes it easier to understand the financial position and performance of the group.
- Improved planning and decision-making: Consolidation provides a comprehensive view of the entire group’s finances, allowing for better-informed business decisions.
- Improved risk management: Group consolidation enables companies to identify and manage risks across the entire group rather than just in individual entities.
- Reduced costs: By streamlining financial reporting and reducing duplicated efforts, group consolidation can lead to cost savings.
- Increased efficiency: Group consolidation can help streamline operations and processes, making the group more efficient.
Three typical challenges with group consolidation
Entities reporting in different systems
Some entities may be using excel, and some may have financial reporting systems, and all need to be merged into one report.
Poor data quality and lack of consistency
Group consolidation relies on accurate and consistent financial data from all entities involved. Poor data quality and inconsistency can result in inaccurate financial reporting and impede the benefits of consolidation.
Differences in local regulations
Companies operating in multiple countries can face challenges with group consolidation due to differences in local accounting and financial reporting regulations. This can result in difficulties reconciling financial data and presenting a consolidated report that meets all relevant regulations.
Time-consuming
It can be challenging to do something you only do occasionally. On top of that, new rules and regulations surface and require your time to review the process. And in general, manually cleaning up and reconciling data takes time and effort.
Tips and best practices for group consolidation
Clarify your goal
Before you start, you must clarify your goal and the data you want to collect.
Secure data quality
An ERP (Enterprize Resource Planning) would be a helpful tool for this task.
Set currency conversions correctly
Doing this manually can create errors that will ruin your entire consolidation. It is better to set up an automized and standardized process for this.
Set common standards
Talk to each other and ensure you have the same standards for your data, formats, units, and naming conventions. Requirements and rules may vary in different countries, but help each other streamline this as much as possible.
Set internal processes
Internal processes are essential. Refrain from significant changes and instead make more minor adjustments as you grow.
Keep it simple
Keep your eyes set on your goal (see our first tips) and peel off anything that is not necessary.
Use a consolidation tool
There are several on the market, but we recommend you look at Konsolidator, which is easy to use, even if you have no previous experience with consolidation. A consolidation tool has several benefits.
- Automatic group processes for intercompany make it easy to eliminate and reconcile.
- There are processes for fixing errors.
- You can get overviews of IFRS16 – goodwill or PPA adjustments automated.
- A tool can include new rules and regulations updates
Do you need help with Group Consolidation?
At Cooach we help growth companies by offering our services with business support, marketing, and sales. Group Consolidation is one of the services we offer within Finance.
We manage consolidation for groups with companies in several countries with different currencies and local differences against the group’s accounting framework. Cooach combines system support with expertise at all levels to produce accurate monthly financial statements, reports to management and the board of directors, and external financial reporting. At the same time, we are constantly prepared for the implementation of new companies, including establishing the PPA’s and training local accounting functions.
As a Cooach client, you can access templates, Q&A, and expert help via Slack. If you are not already a customer, you can still register for a free account and enjoy our template library. Here you can log in or register an account, free or paid, depending on your current needs. https://cooach.io/en/signup/
