Virtually every company wants to grow—it's the nature of business. But with expansion comes the growing pains of financial consolidation that can encompass multiple divisions, subsidiaries and locations around the world.
Fast-growing companies find themselves confronted by a bewildering complexity of foreign currencies and languages, accounting standards, taxation structures, and reporting and compliance requirements that far outstrip the capabilities of the spreadsheets and standalone accounting applications they'd traditionally used for financial consolidation.
It becomes decision time—how can we scale to meet the challenges of multi-company or multi-national financial consolidation?
Naturally, companies will consider old brute force methods. Install new servers, ERP software and back-up systems at new offices around the globe, and engage IT teams to configure, implement and maintain those systems. Or try to get by with QuickBooks and spreadsheets by tasking analysts to manually roll up data from multiple divisions, calculate currency conversions and local taxes and more—accurately and on time.
Cloud computing offers a scalable model for sophisticated financial consolidation in a fraction of the time, and without the substantial capital expenditure, of a typical on-premise ERP system. And by automating key accounting processes, a cloud ERP solution minimises the risk of error and delay of manual approaches to multiple charts of accounts.
Speeding Financial Close by 20% to 50%
Faced with the need for rapid execution, more mid-market businesses are turning to the cloud model for financial consolidation, with impressive results. For instance, a study conducted by Nucleus Research of users of NetSuite OneWorld found a marked acceleration in close times. One reason is that financial managers at headquarters seldom have to wait for weeks to receive data from their subsidiaries.
"Businesses migrating from un-integrated legacy and custom accounting systems to NetSuite OneWorld can expect to accelerate financial close times by 20%," Nucleus found. "Some customers accelerated time to close by up to 50%. Companies with international subsidiaries or multiple legal entities can expect to increase the efficiency and scope of financial and operational data consolidation."
Using a cloud solution for financial consolidation can enhance efficiency in other areas, as well:
- Meet local and global tax requirements. An embedded tax engine will allow you to painlessly handle multiple tax schedules across subsidiaries for everything from GST to VAT, and from consumption tax to general sales tax.
- Manage currency conversion. Look for a solution that will automatically update currency conversion as rates fluctuate, and provide flexibility for manual overrides. It's important that your system also record the rates used at the time of any conversion, providing an important historical record of how sums were generated.
- Reduce errors and manual effort. By automating critical accounting processes, you will minimise the errors inevitable when managing multiple spreadsheets and let personnel focus on value-added analysis.
- Improve visibility into financial operations. Poor visibility into divisional and subsidiary performance inevitably hampers performance of the organisation as a whole. A mature cloud solution provides multiple levels of consolidated reporting and key performance indicators (KPIs) measurable at any time, for any business entity.
Financial consolidation should not exist in a vacuum. The leading cloud-based financial consolidation solutions will integrate with complementary applications for sales management and performance, ecommerce, inventory management, service and support, and more. Meanwhile, a cloud solution enables a multi-company or multi-national business to avoid capital expenditures and ongoing maintenance.
For example, CommVault, a leading provider of enterprise data management, protection and availability software, replaced about 12 disparate applications with NetSuite OneWorld to run global financial consolidation of 35 subsidiaries across Europe, Asia, Australia and South America.
"With NetSuite, we've been able to reduce complexity with a unified platform that integrates with other cloud applications," said Eric Luehmann, CommVault Financial Systems Manager. "NetSuite gives us a system that can grow with us."
The ability to consolidate multiple charts of accounts creates a powerful advantage to enterprises with multiple separate business entities and global businesses with locations distributed worldwide so look to the cloud to take your organisation's productivity and visibility to the next level.