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Financial consolidation and close are fundamental processes that ensure accurate reporting and reconciliation and allow organizations to strategically plan for the future. Yet as businesses grow in complexity, these efforts become increasingly challenging. Outdated tools, manual efforts, and fragmented data spread across an ever-increasing number of teams can turn close and consolidation into a drawn-out process riddled with errors.
As close and consolidation efforts scale, many financial teams face pressure to increase turnaround time for reports and analysis. With Gartner predicting that more than 50% of enterprise-critical data will be created and processed outside the data center or cloud by 2025, the likelihood of errors and delays will continue to grow. Addressing this will require teams to have the right tools to manage data across multiple systems and business units.
Modern solutions are designed to help finance teams address the challenges of scale and complexity by streamlining financial workflows, minimizing risks, and providing timely, reliable insights. Let’s explore how financial consolidation and close are evolving and how to overcome their most pressing challenges.
5 Trends Reshaping Financial Close and Consolidation
Cloud tools, reporting demands, and the ease of accessing global markets all impact how financial close and consolidation efforts occur. Here are five trends we see specifically impacting tools and capabilities to create barriers for finance teams.Incorporating Automation and Artificial Intelligence
Automation and artificial intelligence (AI) can significantly speed up the financial close process to help companies close their books more quickly. AI and machine learning are being integrated to create more seamless, personalized financial services. Through the use of predictive analytics, AI can help businesses anticipate and mitigate risks by analyzing data trends, improving fraud detection, credit scoring, and operational efficiency.Increasing Data Complexity
Companies use financial information from more data sources than ever, adding many new pressures. One culprit and the solution come in the same type of packaging: cloud-based software. The shift to digital solutions offers unmatched scalability, flexibility, and cost-efficiency. At the same time, this availability and ability to integrate tools causes leadership to ask for more complex analytics and reporting.Integrating ESG and Non-Financial Data
Modern financial consolidation systems need to accommodate more varied data, including specialized ESG (Environmental, Social, and Governance) data and metrics. This trend reflects the growing importance of non-financial reporting in corporate performance management and what gets reported in end-of-year close.Adopting Real-Time Reporting Functionality
Traditional close and consolidation methods focused on monthly or quarterly cycles. But with cloud solutions enabling more immediate access and review of financial data, teams must respond more quickly. Addressing this challenge involves adopting more robust tools and automation to keep up with organizations operating across multiple currencies and exchange rates or managing complex supply chains.Blurring Roles of Finance and IT Skills
Technology is increasingly automating financial tasks and computations. To manage the tools and ensure accuracy, teams will need to build a roster of finance professionals and IT experts. Roles will continue to consolidate in tandem with workflows. Look for opportunities to invest in xP&A technology solutions that support collaboration, analytics, and AI-driven forecasting to ease internal demands without harming forecast efficiency or accuracy.5 Challenges Facing Financial Close and Consolidation
Outdated systems and processes create barriers that can disrupt an effective financial consolidation process. Here are five key challenges finance teams face:Reliance on Manual Processes
One of the most prevalent hurdles is the reliance on traditional, manual methods and the use of spreadsheets. Excel can be prone to manual and data-sharing errors. Add in the lack of transparency as to who has made a change in a spreadsheet, and your risks grow. Spreadsheet management takes longer, causing people to rush and further increase the likelihood of a costly mistake.Limited Access to Real-Time Data Across Sources
Traditional financial close and consolidation processes often involve delays due to lengthy data collection and reconciliation cycles. Without real-time access to financial data, organizations struggle to make timely, informed decisions. This lag can negatively impact strategic planning and agility in responding to market changes. Companies often operate with multiple systems across departments, subsidiaries, or regions. Tools like ERP systems can create data silos, complicating efforts to consolidate multi-entity financial information or finalize transactions across departments or functions. Without uniform real-time access to data, decision-making suffers.Finding the Right Tool for Complex Databases
Managing large, complex datasets requires robust financial consolidation software that integrates seamlessly with existing systems. Choosing the wrong tool can exacerbate inefficiencies and create bottlenecks. Additionally, teams often lack the cross-functional expertise needed to address technical challenges. Training must be a core part of tool selection.Compliance with Evolving Regulations
As regulations grow more stringent, ensuring accuracy and traceability in financial reporting is non-negotiable. Failure to meet compliance standards can lead to significant fines and penalties.Data Security Risks
Financial consolidation involves handling sensitive data, such as revenues and expenses, making security a top concern. Cybersecurity threats, unauthorized access, and data breaches can compromise financial integrity. Organizations must prioritize tools with robust encryption, access controls, and audit trails to safeguard their data.Simplifying the Consolidation and Close Process
Accurate financial close and consolidation is critical for strategic decision-making and regulatory compliance. However, it is burdensome as a company expands. To make it manageable, financial teams should consider these automation, standardization, and process best practices to simplify the close and consolidation process.- Aggregation: Consolidate financial data from multiple sources into a single platform to eliminate siloes and discrepancies.
- Data Validation: Build robust data validation rules and limit user access to appropriate levels or data.
- Standardization: Embrace standardization to ensure all departments or subsidiaries follow standard practices, especially for documents like a chart of accounts.
- Training: Implement training and support for everyone who submits and verifies data, not just those on financial teams.
- Risk Management: Reduce the number of manual submissions required across business units to control error risks.
- Automation: Leverage automation across the process, from data entry and intercompany eliminations to reconciliation and data cleaning, minimizing errors and freeing people to focus on high-value analysis.
- Reconciliation: Increase the frequency of reconciliations during the reporting period to identify discrepancies and prevent issues or errors during close.
- Review: Hold reviews of consolidation and close efforts at the end of each period to identify issues, bottlenecks, and areas of improvement.
Key Features of the Best Financial Consolidation Software
For finance professionals, the right tools are essential to manage complexity and scale effectively. Tools like Power BI can help you streamline workflows, improve accuracy and forecasts, and transform outdated methods into efficient, reliable systems. Achieving that requires some core functionality:- Robust Automation: Ensure the consolidation accounting software automates critical financial processes, reducing manual effort and saving time.
- Seamless Integration: Choose tools that integrate with existing financial systems to avoid data silos and improve efficiency.
- Advanced Reporting and Analytics: Look for solutions that can customize reports and actionable insights to support decision-making by those outside the finance team.
- Scalability: Choose a software solution that can grow with your business and adapt to changes in organizational structure and regulations.
- Strong Security: Prioritize solutions with encryption, secure storage, and access controls to protect sensitive financial data.
- Ease of Use and Support: Find an option your team knows or one that they can learn, with plenty of vendor training and support.
