By: Melissa Yeo, DigitalCFO Asia | 12 November 2021
In today’s unpredictable and ever-changing corporate environment, what is the best financial consolidation solution? To adapt to the future of finance, DigitalCFO Asia invited a group of panelists to discuss what you need from a modern day financial consolidation solution over a webinar.
To watch the on-demand webinar, click here.
We summarize 5 tips into how organizations may grow and move away from fragmented financial consolidation processes to the future of finance being the accelerator of growth.
Panelists:
Paul Lennie, CFO Southeast Asia, Asurion
Andrea Ferrarese, Head of Administration & Tax, Golden Goose
Jeremy Ong, Director, Consulting, KPMG
Moderated by:
Celestine See, Board Asia Pacific
In 2020, Golden Goose Group saw a net turnover of 266 million pounds, a 19% increase from 2018. According to Andrea Ferrarese, this could be attributed to the standardization and improvement of processes, coupled with automation of reporting and compliance processes under a single integrated platform by Board that led to better decision-making processes.
1. Consolidation of data at individual business units level
A Gartner survey of finance professionals revealed that 87% of respondents only focus on the Profit and Loss (P&L), with only a minority having looked at the balance sheet. While the P&L gives insights into revenue growth and profitability, companies are not analyzing how effective they are with using the assets or resources such as cash flow, liquidity and inventory balances.
During this pandemic, companies large and small will have to take a closer look at their cash flow. While most companies do it at a country level, finance can add real value by looking at this at the business unit, or the functional level, from the balance sheet point of view. Managers can then make well-informed decisions and make a difference, which could adversely impact the P&L or balance sheet. Ultimately, businesses should focus on making overall better decisions, instead of being solely focused on making P&L decisions, which has short-term impacts instead of helping the company decide how they can operate more optimally in the long run.
2. Decision-making based on true single economic entity
As humans, we are susceptible to error. Traditionally, we spend a lot of time and effort looking and forecasting based on historical data to predict what the future holds for us. In the past, these data sets had to be extracted from multiple tools. Today, however, organizations can adopt a holistic approach and predictive analytics for decision-making based on a true single economic entity, aiding in the improvement of forecast accuracy. With everything in one source of truth, forecasting, planning or machine learning can allow you to learn a lot more as you head towards the next phase, and these learnings can be sufficiently transferred across the centralised analytics.
With a standardized set of reporting, time spent on discussions with the business and finance team can be significantly reduced since the data is easier to maintain. This frees up time for the finance personnel and they can use this time to analyse if sales is above or below average, or if there is a certain pattern to follow.
3. Collaborative approach to overcome remote working challenges
In many large MNCs that have grown rapidly by acquisition over time, a whole portfolio of systems that are not harmonized and fragmented translates into issues which could have been highlighted in terms of effort and time taken to bring them together in a central location and transform them into a common structure for reporting activities.
Board provides a great platform to harmonise data collection systems, translating all the languages into a common language into a unique system. With a common goal in mind, an organization can provide employees with the correct training and skill set to upskill them and prepare them for this transformation journey.
4. Allow finance functions to be growth accelerators with a modern financial consolidation process
From a process perspective, harmonization can be broken down into 3 broad areas to be growth accelerators.
a. Bridging in aggregation activities
How do you pull your information from various finance systems across the various entities, and aggregate that into a central location? In many organizations, the longer term direction would be to move towards a common platform with a common chart of account structure , but this tends to be a longer term goal and not something that large organizations can undertake overnight. In intermediate terms, it means to look at a layer that can be put on top of these various systems to serve as bridging and aggregation.
b. Transformation or optimization of how data is being processed
Even when data has been brought to a common place, there’s often the need to present or restructure that to the format that is required on a group basis. Whether you have talked about that in different accounting standards, or the way the entities have been fundamentally structured to start with, this may be different from what the group wants to see. Therefore, this data has to be automated or transformed before you can use it.
c. Coordination of the entire end-to-end process
This means to have visibility of what takes place across the various entities, understanding certain procedures, timelines and targets so everyone falls in line with these requirements and the control of how you govern the various versions of data and make adjustments, to coordinate the data before arriving at the final set.
Modern day financial consolidation solution to stay at the forefront of finance
In this digital age, everything is getting digitized and finance is no different. There is a growing shift towards value creation, providing insights, and the face of digitalization has just accelerated the shift of businesses.
Lastly, we would like to thank our technology partner and host, Board Asia Pacific, for this very insightly session on financial consolidation. To understand and know more about how Board can assist you with your finance processes, you can view the embedded file below, or contact Board Asia Pacific at yploh@board.com.
