Spreadsheet Hell: The Consolidation, Close and Reporting Conundrum

The financial consolidation, close and reporting process is one that most organizations continue to struggle with. Is it because the process is complex? Not necessarily. In a typical business, it usually involves the straightforward closure of books for the accounting cycle, collection of financial data, and generating financial statements for internal management and external statutory reporting.

However, increased regulatory compliance and stakeholder demands are exerting pressure on the financial consolidation and reporting process. And the disconnected nature of the process (which is partly supported by spreadsheets and disparate reporting and source systems) makes it problematic for finance to meet the heightened demands.

From our experience working with clients, we find that there are nine areas that typically pose challenges to the CFO and the finance team

Consolidation today is no longer the aggregation of financials of two or more companies in the group. For many organizations, consolidation of financial statements has assumed complexities of immense proportions. For one, the data collation process has become quite tedious and time-consuming, even as spreadsheets continue to be the focal point. The issue of laying down audit trails has also become a pressing need.

From our experience working with clients, we find that there are nine areas that typically pose challenges to the CFO and the finance team:

  • Data collection from multiple source systems
  • Over reliance on spreadsheets
  • Currency complexities
  • Intercompany eliminations
  • Multi-GAAP reporting
  • Complex ownership structures
  • Top level consolidation adjustments
  • Multiple reporting requirements
  • Disconnected audit trail of data

Data collection

There are still many organizations in Asia that require the finance function to extract information from multiple source systems that use different format, manually upload data, work with inconsistent mapping definitions, use spreadsheets for reporting and other legacy practices that were fine in the analog era, but not in the digital age.

We recommend to our clients that they implement a solution with ETL (extract–transform–load) capabilities.  In our experience, ETL enables:

  • Integration of source systems with a consolidation solution
  • Importation of data from disparate source systems, including Excel files
  • Pre-defined mapping tables that can be shared where required
  • Data-transformation capabilities such as sign flips (debit vs. credit) and custom calculations

In addition, a robust ETL tool has the following benefits:

  • A unified central repository
  • Consistency in data transformation
  • Detailed audit trails
  • Drill-through capabilities from consolidation system to source systems/files
  • Shortened time for data collection, speeding up the entire close process

One may question the need for an ETL tool if you have a global ERP rollout. But how about entities added to your group through M&A activities? Also, we need to consider if it makes sense to have thousands and thousands of accounts in our consolidation process just because these exist in our legacy ERP systems.  

Over reliance on spreadsheets

Many organizations continue to rely on spreadsheets to collect, format and process data that is often extracted from disparate source systems. As it is one of the most common Microsoft Office applications, Excel offers a cost-effective solution in the short term. But this approach is neither sustainable nor scalable in the long term.

The other challenges of using spreadsheets include:

  • They are error-prone, resulting in data inaccuracies
  • They have limited version-control capabilities
  • They have inherent limitations in handling complex computations
  • There are often broken links and macros
  • The more complex the workbook, the more checks that are required to ensure it is error-free
  • There is a lack of audit trail
  • Implementation requires manual controls 
  • 1
  • 2
  • 3
  • Next page

Related Articles

Becoming a business partner means becoming a better communicator by producing...
Storytelling is not only for kids, but also for grown-ups in the middle of...
More than 2,000 financial institutions have signed up for The Know Your...
In 2015, Hong Kong's listed companies will be required to submit integrated...