Most accountants would agree: consolidating financial data across multiple systems is an extremely tedious and time-consuming process.
However, leveraging the right financial consolidation software can help streamline this process and provide real-time visibility into key financial metrics.
In this post, we'll explore the top 10 financial consolidation tools - including leading options like OneStream, Hyperion, and Adaptive Insights - outlining their key capabilities, best practices for implementation, and how innovations like automation and advanced analytics are shaping the future of these platforms.
Navigating the Landscape of Best Financial Consolidation Software
Consolidating financial data across multiple entities or subsidiaries can be an arduous task for accountants. Thankfully, several software tools exist to streamline the financial consolidation process. These solutions help accountants efficiently combine financial accounts, eliminate intercompany transactions, translate foreign currencies, and generate consolidated financial statements.
When selecting the ideal consolidation software, accountants should consider factors like:
Ease of Use
The platform should have an intuitive, user-friendly interface allowing accountants to map charts of accounts, build consolidation rules, import data from various ERPs, and work collaboratively with others to complete the consolidation. Solutions like OneStream provide guided workflows to simplify complex consolidation steps.
Scalability
The ability to consolidate data across 10 entities is much different than doing so across 100+ subsidiaries. The software should flexibly scale to support current needs and expected business growth. Web-based platforms like Hyperion allow easy expansion as more entities get added.
Reporting and Analysis
Consolidation software should do more than just combine financial data - it should enable deeper analysis through flexible reporting, dashboards, and visualizations. This gives finance leaders better insights to guide strategic decisions. For example, Board offers customizable reports and analytics for consolidated figures.
Compliance and Controls
Given strict accounting regulations, having adequate controls and audit trails around the consolidation process is crucial. The right software solution will have preventative controls, validation checks, and full transparency into transaction flows across all levels of consolidation.
By keeping these criteria in mind, accountants can determine the best financial consolidation software for their unique business needs - whether that's a simple, low-cost option for fewer entities or a more robust platform to handle global, complex consolidation requirements. The key is finding a flexible, user-friendly tool that grows alongside the business.
What is the 20 consolidation rule?
The 20 consolidation rule refers to an accounting guideline regarding when parent companies must use consolidated financial reporting. Specifically, parent companies that hold more than 20% of the voting stock in another company (the subsidiary) qualify to use consolidated accounting. This means the parent company must report its subsidiary's assets, liabilities, revenues, and expenses on its own consolidated financial statements.
Consolidated reporting provides a comprehensive view of a parent company's total operations by combining its financials with its subsidiaries in which it holds a controlling financial interest (over 20% ownership). This gives investors and stakeholders a more accurate picture of a group's complete financial position and performance.
On the other hand, if a parent company holds less than 20% of a subsidiary's voting stock, it does not qualify to use full consolidation. Instead, it must report that investment on its books using the equity method. This means the parent records its portion of the subsidiary's earnings and losses on its income statement. The equity method provides less visibility than full consolidation given it only accounts for the parent's stake rather than total combined financials.
In summary, holding over 20% ownership meets the threshold for consolidation rule compliance. Dropping under 20% shifts the reporting to the equity method. This 20% cutoff is a key determinant in accounting and reporting standards for parent-subsidiary relationships. Adhering to the guideline provides consistency and transparency for investors reviewing financial statements involving related business entities.
What is the best way to consolidate financial statements?
The purpose of consolidated financial statements is to present financial information for a group of entities as a single economic unit. This provides more transparency into the overall financial position and performance of related companies.
When preparing consolidated statements, there are some key steps to follow:
Gather Relevant Information
The first step is to identify all entities that need to be included and collect their financial statements and transaction data. This ensures you have the full picture before beginning the consolidation process.
Eliminate Intragroup Transactions
Transactions between entities in the consolidated group need to be eliminated. This includes payables/receivables, revenue/expenses, and asset transfers. Removing these internal transactions avoids double-counting revenues and assets.
Adjust for Ownership Percentages
For partly-owned subsidiaries, their assets, liabilities, revenues and expenses should be consolidated based on the parent company's percentage of ownership. This accurately reflects the portion of the subsidiary's finances attributable to the parent group.
Revalue Assets and Goodwill
Asset revaluation may be required to bring partly-owned subsidiaries onto the same accounting methods. Any excess of purchase price over net assets is recorded as goodwill. This harmonizes policies across the group.
Prepare Consolidated Financials
Finally, individual financial statements can be combined, rolling up assets, liabilities, equity, revenues, expenses and cash flows into group-wide consolidated accounts. Notes should disclose consolidation methods and policies.
Following this step-by-step methodology helps produce high-quality, transparent consolidated financial statements that give stakeholders an enterprise-level view of financial position and performance. Leveraging consolidation software can streamline the process.
What is the consolidation method of accounting?
The consolidation method works by reporting the subsidiary's balances in a combined statement along with the parent company's balances, hence “consolidated”. Under the consolidation method, a parent company combines its own revenue with 100% of the revenue from the subsidiary.
This provides a comprehensive overview of the financial position and performance of the group as a whole. Some key aspects of consolidation accounting include:
- Combining assets, liabilities, equity, income, and expenses of the parent and subsidiary
- Eliminating intercompany transactions and balances
- Reporting minority interest and goodwill
- Using acquisition accounting for newly acquired subsidiaries
Consolidation presents financial information for the group as a single economic unit. This allows stakeholders like investors and creditors to better evaluate the company's operating results and financial position.
For accountants, preparing consolidated financial statements ensures proper compliance with accounting standards like GAAP and IFRS. Consolidation requires tracking ownership percentages, reconciling accounts across entities, and applying complex technical accounting rules.
Using can help businesses streamline consolidation while leveraging specialized expertise. Their experienced accountants handle everything from data gathering to consolidation entries to report preparation. This simplifies the process and delivers consolidated statements tailored to each client's specific needs.
Overall, consolidation accounting plays a key role in financial reporting by presenting a group perspective. The method combines accounts based on ownership stakes rather than legal form. Mastering this complex area takes diligence and knowledge of underlying accounting standards. Tools like Vintti provide turnkey support so businesses can focus on strategy while benefiting from consolidation best practices.
What are the three types of consolidation?
The three main types of consolidation in accounting are:
Full Consolidation
Full consolidation is when a parent company fully consolidates the assets, liabilities, revenues, and expenses of a subsidiary in which it holds a controlling financial interest, typically ownership of over 50% of voting shares. This gives investors and stakeholders an overall view of the financial position and operating performance of the group as a whole.
With full consolidation, all intragroup transactions and balances are eliminated. Non-controlling interests are reported separately to show the portion not owned by the parent company.
Proportionate Consolidation
Proportionate consolidation applies to joint ventures where the investing companies have joint control and rights to the venture's net assets. Each company consolidates a percentage of the JV’s accounts corresponding to their ownership percentage.
Unlike full consolidation, only intragroup transactions between the venturer and the jointly controlled entity are eliminated with this method.
Equity Method
The equity method is used for investments where the investor can exert significant influence over the investee, but does not have a controlling financial interest. This is usually for ownership stakes between 20-50%.
With the equity method, the investment is recorded at acquisition cost. The investor’s share of the investee’s profits and losses post-acquisition is recognized in the income statement and added to/deducted from the investment account. Only dividends received are recorded in the balance sheet rather than full line-by-line reporting.
So in summary - full consolidation for subsidiaries, proportionate consolidation for jointly controlled entities, and equity method for associates with notable influence. Understanding these 3 consolidation types is key for accurate financial reporting.
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Exploring the Top 10 Financial Consolidation Software Options
Financial consolidation is a critical process for many businesses, especially as they grow and expand globally. Selecting the right financial consolidation software can help streamline the consolidation process, improve accuracy, provide deeper insight through reporting and analytics, and ensure compliance with various accounting regulations.
In exploring some of the top financial consolidation tools available, there are a few key factors to consider:
Functionality - Does the software have all the necessary features to support your current and future consolidation needs? Can it handle complex organizational structures, multiple currencies, intercompany eliminations, and generating necessary financial reports?
Ease of use - Is the interface intuitive and easy to navigate? Can your accounting team get up to speed quickly with minimal training required?
Customer support - Does the vendor provide knowledgeable support when issues arise? Are they responsive across multiple channels like phone, email, chat, etc.?
Cost - Does the pricing align with your budget and offer flexibility to scale up or down as needed? Are all the features you need included or will extra costs be incurred?
With those criteria in mind, below is an overview of 5 leading options for financial consolidation software:
OneStream Consolidation: Leading the Pack
OneStream is one of the top-rated cloud-based consolidation solutions, leading the market with the broadest feature set and excellent customer satisfaction scores.
OneStream makes financial consolidation easy with an intuitive interface, predefined content packs tailored to different industries, and powerful built-in financial intelligence. Drill-down analysis provides deeper visibility into the numbers. Customers praise OneStream's responsive support team and regular software updates that add new capabilities.
The extensive feature list enables handling complex global consolidation needs. OneStream natively consolidates data from nearly any ERP or financial system. Built-in financial data quality controls also minimize errors.
OneStream leads in predictive analytics compared to competitors. The platform analyzes trends across hundreds of key performance indicators, enabling more accurate forecasts.
While OneStream has a higher initial price point, many larger enterprises find the functionality and ease of use provide significant long-term value.
Hyperion Consolidation Software: A Trusted Giant
Oracle's Hyperion Financial Management (HFM) is one of the most widely-used consolidation tools globally. Known for reliability and rich capabilities, Hyperion integrates well across the Oracle stack.
Hyperion makes quick work of high volume data consolidation, aggregation, drill-down reporting and workflow automation. The interface allows business users to easily create and distribute financial reports themselves without IT help.
Hyperion enables compliance with global accounting standards and includes pre-built regulatory reports for over 100 countries. Rule-based logic catches and explains consolidation errors for cleaner financials.
Customers choosing Hyperion include large multinational organizations like UnitedHealth Group, DuPont and Overstock.com. While powerful, it can have a steep learning curve. Hyperion's licensing model is also expensive compared to competing solutions.
Adaptive Insights: Agility Meets Financial Data
Adaptive Insights Business Planning Cloud delivers flexible, cloud-based software for finance teams. It unifies planning, consolidation, reporting and analytics in a single system oriented around the FP&A process.
The web-based interface allows authorized users to easily access reports and create dashboards tailored to their needs. The software simplifies collaborating across distributed finance teams with workflow notifications, commentary and version control features.
Adaptive Insights automatically aggregates data from across the business in a flexible data model. Users can confidently adapt plans, models and business rules as needs change.
Over 4,700 customers use Adaptive Insights for its usability and rapid time-to-value. While it may lack some specialized features larger enterprises demand, Adaptive Insights suits fast-growing, midsized organizations well.
Tagetik: Tailored for Industry-Specific Needs
Tagetik provides a unified platform for financial corporate performance management and consolidation. It's tailored for the complex regulatory needs of various industries and global regions.
Pre-built templates streamline consolidating data and meeting local compliance requirements across different business units, products and geographies. This reduces risk and saves time compared to building custom reports.
Tagetik enables deep financial analysis with intuitive dashboards, modeling capabilities and drill-down to transactional data. Collaboration tools keep stakeholders aligned on the same figures and commentary.
Over 1,250 organizations use Tagetik's industry-focused expertise globally. The extensive customization options do make it more complex than other solutions. Licensing fees also run higher for the premium capabilities Tagetik offers.
BOARD Consolidation Software: A Unified Solution
BOARD International delivers integrated financial planning, reporting and analysis software. The unified solution provides a single source of truth for business insights.
Intuitive dashboards allow self-service access to reports, budget vs. actuals, and other key performance indicators. User-friendly templates make it fast to create standard and ad hoc reports.
BOARD supports complex data harmonization across disparate source systems, beyond just financial data. Built-in AI capabilities like natural language query search for reports in plain business language.
Over 3,000 businesses use BOARD worldwide. Customers highlight the software's broad capabilities and ease of use enabling faster, data-driven decisions. However, some users say it can be time-intensive building customized reports.
In summary, today's leading financial consolidation tools help deliver efficiency, insight and compliance to enterprises worldwide. Assessing key software selection criteria like functionality, usability, support and cost can highlight the ideal choice for your organization and use case. Reaching out to vendor references or reading independent product reviews also provides valuable perspective.
Essential Features for Effective Financial Consolidation
When evaluating financial consolidation systems, focus on core features that align with your organizational needs. The right tools can help streamline consolidation processes while providing actionable insights.
Data Consolidation Tools: The Backbone of Reporting
Effective financial consolidation relies on the ability to accurately combine data across business units, divisions, and systems. Robust ETL (extract, transform, load) enables automated:
- Data integration from multiple systems like ERPs, planning tools, custom databases etc. into a unified structure
- Validation and transformation of incoming data into the appropriate format
- Loading and updating of consolidated data repositories and data warehouses
This eliminates reliance on complex manual processes like spreadsheets prone to errors. It also ensures data consistency, completeness, and timeliness - the foundation for reliable analysis.
Drill-Down Analysis: Gaining Insights into Every Figure
Granular drill-down analysis allows tracing consolidated figures back to individual transactions across multiple levels. Users can:
- Start from high-level performance dashboards and reports
- Drill down to legal entity or department financials
- Analyze GL account balances, journal entries, and budgets
- Trace figures down to individual invoices, purchase orders etc.
This interconnectivity ensures transparency while allowing investigations into data discrepancies. Auditors can validate consolidated statements against underlying systems. Analytics drive informed decisions at any level.
Interactive Reporting and Dashboards: Visualization That Matters
Static reporting has limited business value. Modern tools like OneStream enable customizable dashboards, interactive reports, and self-service BI empowering users to:
- Visualize data with charts, graphs and maps
- Manipulate reports dynamically (sorting, filtering, expanding)
- Create/save personalized views for faster insights
- Share live reports securely across the organization
With flexibility in reporting and analysis, financial data can be presented in the most relevant ways for various stakeholders needs - from high-level KPI monitoring to granular analysis.
Streamlined Workflow Management: Enhancing Efficiency
Consolidation often encompasses manual repetitive processes - data collection, validation, journal entries etc. Robust workflow automation allows defining approval chains to control and accelerate key sub-processes like:
- Data validation checkpoints
- Journal entry reviews and posting
- Balance orchestration and adjustments
- Final close task sequencing
With process governance, transparency and efficiency improves dramatically while risks reduce. This frees up teams to focus on value-add analysis rather than data wrangling.
The right consolidation system transforms finance teams from data aggregators to strategic advisors through accurate and accessible information. Evaluating solutions that integrate comprehensive features aligning to organizational needs is key to unlocking consolidation success and insights.
Best Practices for Implementing Your Chosen Consolidation Software
Avoid pitfalls when transitioning to a new system with thorough planning, user training, and post go-live support.
Setting Realistic Timelines for the Financial Consolidation Process
Consolidation software implementations often take 6+ months when accounting for planning, setup, testing and change management. It's important to allocate sufficient time for each stage of the project to ensure success. Rushing key steps like requirements gathering, data migration, and user acceptance testing can undermine the long-term viability of the system.
Aim for at least 2-3 months of planning before configuration even begins. This stage involves aligning stakeholders, detailing requirements, mapping data flows, and finalizing timelines. The actual set up and testing in a sandbox environment can then take another 2-3 months. Pilot testing with real data should run for at least 1 month prior to go-live to catch any remaining issues.
While it may be tempting to accelerate the rollout, resist taking shortcuts that could jeopardize user adoption further down the line. A thoughtfully paced implementation aligned to the accounting team's bandwidth will pay dividends.
Ensuring Executive Buy-In for a Smooth Consolidation Process in Accounting
Financial consolidation changes impact the whole organization. Leadership alignment and sponsorship is crucial to drive engagement across departments and hierarchy levels.
Secure executive commitment early in the project lifecycle through demos and cost-benefit analyses tailored to strategic priorities like growth, agility, and scalability. Address concerns transparently by highlighting capability gaps in legacy systems and quantifying the hard and soft ROI expected from improved analytics.
Emphasize the need for leaders to vocally advocate for the initiative. Their messaging reinforces credibility and urgency, inspiring collaboration in data preparation and migration. Sustained senior management support is also key for change management post go-live, encouraging consistent usage and issue escalation.
Deep Training for Power Users in Best Consolidation Software for Xero and Others
Identify the core finance team members who will configure and support the system. Invest in their capability-building through both functional and technical enablement across reporting, allocations, translations, drill-downs etc.
Hands-on training workshops focused on real-life use cases are ideal. While classroom tutorials provide fundamentals, practical sessions build the muscle memory needed to apply learnings. Assign training leads to continue assisting users post go-live and share tips.
Don't neglect technical admin training on interfaces, integrations, and customization. The underlying platform architecture can deeply impact the accounting experience. Ensure your power users are equipped to fully utilize and enhance the system over time through savvy modifications aligned to evolving needs.
Empowered key users with strong consolidation software mastery unlock everyone's productivity by disseminating expertise.
Innovations Shaping the Future of Financial Consolidation Tools
Emerging capabilities like AI, predictive modeling and blockchain integration indicate an era of more automated, insightful consolidation.
Automation and AI: The New Drivers of Financial Efficiency
Technologies like optical character recognition, chatbots and RPA will drive efficiencies in financial consolidation.
AI and automation have the potential to significantly streamline consolidation processes. Optical character recognition can automatically extract data from invoices and receipts to eliminate manual data entry. Chatbots can handle common financial queries from business units to free up consolidation teams. Robotic process automation can automate repetitive consolidation tasks to reduce errors and labor hours.
As these technologies mature, consolidation professionals can focus less on mechanical processes and more on value-adding analysis. AI-powered anomaly detection will flag questionable journal entries or variances for investigation. Natural language processing can interpret commentary from operating units. Predictive analytics will enable continuous forecasting for better planning.
The benefits also extend to auditors and regulators who gain greater transparency from digital audit trails and advanced analytics providing a birds-eye view of financials. The operational efficiencies translate into quicker financial reporting and regulatory compliance.
Leveraging Advanced Analytics for Strategic Foresight
Predictive modeling and prescriptive insights will empower more strategic decision-making.
Consolidation systems are now harnessing the predictive power of data science. Powerful statistical models can forecast revenue trends, analyze customer lifetime value and estimate bad debt provisions. Combining external data from economic indicators and market reports with internal metrics creates a holistic perspective of future financial performance.
Prescriptive analytics takes it a step beyond predictions to recommend data-driven decisions like optimal inventory levels, targeted marketing offers and M&A opportunities. This empowers management to make strategic choices backed by technology.
Scenario analysis tools enable finance leaders to assess the revenue, cost and risk implications of potential strategies. The quantifiable and visualized insights facilitate alignment between departments on the best corporate strategy based on financial impact.
Embracing Continuous Accounting for Real-Time Insights
Real-time consolidation without waiting for period-end becomes achievable with leading-edge systems.
Traditionally, consolidation occurs periodically causing delays between business events and visibility into financial outcomes. Modern consolidation platforms integrate with source systems to collate real-time operational data. This "continuous accounting" paradigm eliminates lags allowing instant financial analysis rather than waiting for month-, quarter- or year-end.
Continuous processing expands reporting possibilities. Consolidation numbers can be generated daily rather than only 12 or 4 times a year. This granular view allows timely responses to emerging trends. Finance teams gain flexibility to produce consolidation snapshots at any point.
As innovations in financial consolidation tools continue, the future points towards automated, real-time consolidation capabilities augmented by prescriptive analytics to transform not only periodic reporting but also strategic decision making.
Synthesizing Key Insights for Strategic Financial Consolidation
In summary, modern consolidation tools bring greater speed, accuracy and actionable insights to complex finance data, helping accountants provide strategic counsel.
Streamlining Data Consolidation
Consolidation software centralizes financial data from multiple sources into a single version of truth. This streamlines the consolidation process, saving accountants significant time previously spent manually reconciling discrepancies across systems. Top solutions like OneStream provide workflow automation for consolidation tasks and enforce tight process controls for data integrity.
By eliminating manual effort, finance teams focus more time unlocking strategic insights instead of chasing data issues. They gain greater visibility into performance trends and can provide timely analysis to guide executive decisions.
Enhancing Analysis Capabilities
Leading tools like Board also feature built-in reporting and analytics capabilities on consolidated data. The software allows accountants to spot anomalies, investigate root causes, and answer ad hoc questions on the fly without IT support.
Easy access to a unified data set facilitates detailed contribution analysis, cash forecasting, scenario comparisons, and more - key inputs for strategic planning. Equipped with actionable intelligence, accountants serve as true partners to the business instead of data aggregators.
Driving Finance Transformation
Ultimately, adopting the right consolidation solution allows finance to transform from scorekeeper to strategic advisor. With a "single source of truth" that connects operational data to financial reporting, accountants gain broad visibility to guide decisions proactively.
The centralized system also breaks down functional silos between management accounting, financial accounting, treasury, etc. Unified data insights give all finance team members shared context to collaborate better and pivot quickly based on emerging business priorities.
