Step By Step Guide To Optimize Your Company's Consolidation Process

By Sam Cheo, Managing Director, Sigma Conso Asia
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In our previous article, we highlighted two areas to help you identify if your company’s consolidation process is efficient. Following that, we want to help you optimize your process with a step-by-step guide.

Here is a step-by-step guide to optimize your company’s consolidation process.

1. Planning And Implementing A Schedule Of Deadlines To Be Met

The first step that a company needs to take is to plan and implement a schedule that is agreed upon by every stakeholder involved in the consolidation process from the parent company to each subsidiary. This includes minor details like the cut‐off date to the reconciliation of intragroup transactions to ensure that everyone involved in the process is on the same page. This will help to reduce the friction between subsidiaries and the parent company whenever the reporting period is nearing.

2. Creation Of A Consolidation Manual

While the idea of a group consolidation instructions guide might sound dispensable, it is a stroke of genius. In order to create the consolidation manual, the whole consolidation process is being thought through by the team. No assumptions are being left untouched. This minimises the possibility of any conflicts, misunderstandings or overlap of duties in carrying out the whole consolidation process.

3. Defining The Use Of A Unique Chart Of Accounts For The Group

Chart of accounts (COA) is a financial organizational tool that shows a complete listing of every account in the company’s accounting system for recording transactions in the general ledger, i.e. asset, liability, equity, revenue and expense. With a clearly defined set of COA, it prevents any confusion, especially for subsidiaries that are trying to understand the parent company’s COA.

4. Implementing A Strict Validation Control

There are various variables involved in financial consolidation. In a generic use of excel to complete the consolidation process, variables are often undefined and left to the end user to decide. As a result, variables often end up being uncoordinated and require additional effort to convert them into the same variable type. Thus, it is vital to start the process right by implementing a strict validation control. If the variables do not fit the validation control set by the parent company, they cannot be put into the system.

5. Scheduling Reconciliation Of Intragroup Transactions (Intercos) At Regular Intervals

Reconciliation of intragroup transactions has to be carried out at regular intervals. This ensures that the financial records are reconciled in a timely manner, i.e. refreshed and kept up-to-date. Without setting a regular interval for reconciliation, there will be chaos and delays in the midst of consolidation.

6. Push For Automation To Allow Automated Reporting And Use Of Dynamic Links

Manual reporting is often tedious and delayed due to the level of checks and effort required. To make reporting more efficient, automation can be achieved through CPM software. Reports can be churned automatically through the CPM software with dynamic links to data that are found within the report. This allows stakeholders to trace the journal trails through dynamic links, rather than having to task someone else to look into the matter manually.

7. Selecting Consolidation And Reporting Software Package Best‐Suited For The Company

To automate the consolidation process, your company has to select the most suited consolidation and reporting software package that can meet the needs of every stakeholder within the company. The package has to meet the group's internal and external communication needs in a range of formats and for multiple users/departments. In addition, it needs to support the analytical requirements of internal and external decision‐makers at both the financial and management levels.

Note: this article was originally published on LinkedIn.