Money Matters

Consolidated financial reporting: 5 things to consider when turning complex data into valuable insights

Discover how tech and global changes play a role when it comes to consolidated financial reporting and creating valuable business insights.

If your company has multiple divisions or subsidiaries – and let’s face it, many do – then you will be aware of the need to prepare consolidated financial reports.

This will often be for an entire group in order to give a picture of the financial health of the parent company.

You will also know what a headache such reporting is, even for the most experienced of accountants and finance teams.

It requires huge quantities of data to be processed, often in different currencies, across territories, and as such can easily lead to misinterpretation and mistakes.

I’m always speaking to finance people about their need for accuracy and for their consolidated data to present the narrative they want.

These are challenges often keenly felt.

To compound the data headache, if you then layer in the amount of change in the world – from new regulations and recent social and economic shifts, to technological developments and innovations – it can sometimes feel like you’ve only just got on top of making sense of your data as something new comes along and changes everything.

In this article, across five points, I’m going to look at some of these changes. And how having a clear understanding of them can provide opportunities to make your data easier to manage and provide ways to navigate decisions you might take for your business(es).

1. WFH makes a shared platform a must

It would be amiss of me to not start by mentioning the impact of the coronavirus pandemic. One clear result of this: the new norm is now working from home, or WFH in today’s speak.

Throughout the pandemic, what’s become clear is that to make WFH a success accountancy and finance need the right technology tools; ones that can be accessed by all, provide a single source of data, and which champion teamwork and collaboration.

When these teams are able to collaborate and communicate clearly, they can help reduce the impact on revenue, profits and business operations.

In these Covid times, businesses have had to make big decisions daily.

Working at such speed, with so much change happening fast, has only highlighted the need for accurate financial reporting in order to simply take stock.

For staff in different locations, who are working from home, this points to the need for a shared platform, which your remote workers can all see, plug into and collaborate around.

A shared, single source of precise data that enables your teams to quickly and easily monitor, analyse and report on financial health and performance, all in collaboration with others across your business.

As a quick aside, it seems that working from home is here to stay – or at least a hybrid of the office and WFH – and no longer considered a productivity drain.

According to a June 2020 PwC survey, 54% of CFOs plan to make remote work a permanent option.

Next steps

My advice would be to view a shared platform not just as a Covid stop-gap but as a more serious must-have moving forward.

Look at how you could better collaborate across your teams, or with your clients, with the aid of technology.

Build a wish list of features and functionalities that you would want from a shared platform, and then explore the market to find the right one for you.

2. Pivoting to technology leads to automation

Alongside remote working, the pandemic has seen businesses increasingly pivot to technology (think Zoom, Microsoft Teams, etc), with automation also driving much of this.

However, automation has been a growing trend in finance, with routine rules-based tasks being automated more and more.

In a Deloitte/IMA survey released in August 2020, more than 50% of finance and accounting professionals indicated automation would impact how their company performed its work in the next one to two years.

What we see at Joiin is businesses looking for a shared platform that will do much of the heavy lifting when it comes to financial data management.

They want to strip away the monthly burden – to simply click and connect different accounts; to let algorithms, rules and system settings consolidate different sources of data; to use inbuilt currency conversions when handling multi-currencies; to benefit from off-the-shelf reports that format reports for you.

The list of automated tasks is endless, and hugely beneficial for accountants and finance teams who want to produce compelling reports that tell an accurate story and drive decision making.

And to do all of this easily, while feeling empowered and in collaboration with others.

Next steps

As you’re scoping what you want from a shared platform, also consider any routine, rules-based tasks that could be automated.

Think about those fiddly actions within spreadsheets – the ones that require complex workarounds or where the manual handling of data has become a burden, as this is where you will find tasks ripe for automation.

Add to your wish list.

3. Digital-first mindset means eco-systems and connected apps

Working from home and automation are undoubtedly two major changes we can all see around us right now.

But in the wider economy, there has been a boom in people leaving the daily 9-5 grind to set up their own businesses for some time, with entrepreneurship resulting in more companies being set up than ever before.

This changing business landscape, especially in the tech industry where businesses often invest in several new companies, or venture or seed capital firms, is having an impact on financial portfolio reporting.

Financial consolidation also affects franchises or organisations that are collaborating to take advantage of economies of scale – such as NHS trusts and veterinary practices – investors with property portfolios, family offices or global business that operate in multiple countries.

Put simply, the ability to aggregate financial data is something that an increasing number of business owners are having to become familiar with.

As a result, a digital-first mindset is becoming part and parcel of the growth of these businesses.

Advances in cloud technology mean we have all had access to cloud-based financial accounting software for some time, which offer business owners cost-effective and easy-to-use systems for managing their company finances.

All of this has been and should continue to be embraced.

It wasn’t long ago that as businesses grew, they would move away from using spreadsheets for their finances to traditional ERP (enterprise resource planning) platforms.

It provided the solution to issues associated with growth, such as entities operating in different territories, running different currencies, or being multi-vertical or multidisciplined with little or no alignment.

The drawback to using ERP software was twofold: they were extremely expensive and highly complex.

Therefore, difficult to implement.

Businesses had to reach a certain size and scale, with deep pockets, before they could invest, something that was simply not possible for most businesses.

But the emergence of cloud accounting has changed this situation forever. You can now be digital-first and really mean it.

As with remote working, thinking digitally also looks set to remain, with 77% of business leaders saying that shifting their organisation to a digital-first mindset will be one of the legacies of Covid, according to the Advanced Annual Trends Survey 2021.

At Joiin, we’ve certainly seen an increase in the number of businesses from across all industries using cloud accounting systems to manage finances for multiple business entities.

For example, an NHS trust working with multiple organisations, or a venture capital company running multiple start-ups in different stages.

Cloud accounting software has been revolutionary for businesses.

And to enhance what it can offer, there are now platforms available that can seamlessly integrate with it. These platforms can merge multiple company accounts into one, allowing you to create a range of consolidated financial reports.

Next steps

Look at the wider ecosystem surrounding your cloud accountancy software and find a connected app – a decent app marketplace is a good starting point.

Have your wish list to hand and check this against the features for each connected app.

4. Technology enables you to go global and local

At Joiin, one of the most striking shifts we’re seeing in the business landscape is how the globalisation of a business now takes days, not years.

If a business wants to move fast, it can easily get people working together at various worldwide locations via shared platforms in the cloud.

It really is that simple.

However, wherever you are in the world, there are different types of finance governing bodies. At Joiin, many of our clients are subject to GAAP (Generally Accepted Accounting Practice) and IFRS (International Financial Reporting Standards) compliance reporting, and there are many other standards across the globe.

When dealing with multiple entities, companies must ensure they have one standard reporting system in place across all their companies.

They need to take into account the use of different currencies and different accounting standards in different countries, and ensure they keep up to date with ever-changing regulations.

In addition, if mistakes creep into the financial statements as a result of human error, then this will require further work by auditors and incur further costs to your business, as well as time.

So, while it’s imperative you make the most of technology, do ensure any system you implement has the ability to create the localised reports you need, however global your operations.

For example, the global shift towards ‘making tax digital’ initiatives and the real-time reporting requirements of these is gathering pace as governments seek to streamline processes and shrink the tax gap, with a variety of MTD initiatives now in place globally.

Next steps

Look for custom reporting features in any financial reporting platform you consider.

Custom reporting features enable both accountants and finance teams to quickly and easily provide accurate statutory and management report packs in a range of formats for all sorts of stakeholders.

5. Now is the time for insights, not just data

Financial reporting is still predominantly viewed as a way of looking back at what has happened, to summarise activities to date and report information.

If you have a shared system in place that empowers your people through digitalisation and accurate data and does much of the heavy lifting when it comes to data management – in the form of automation and ready-made reports – then the entire reporting process will certainly be eased and enhanced, while also much more tailored to today’s business demands.

To me, this sounds fabulous. A no-brainer even. But there’s even more available in my opinion.

Where we’ve been delivering added value is by not only consolidating data but offering near real-time data visualisations and insight-driven dashboards.

These can prove highly beneficial, particularly in light of the real-time reporting requirements of MTD initiatives being implemented across the world.

Next steps

Think big.

Imagine if you could have all of the financial insights you need in near real-time, right in front of you.  What would this look like and how much easier would life be for your teams, or when working with clients?

I’m always pushing my time to deliver more insights that will ultimately benefit accountancy and finance teams.

We love to think big, too.

Final thoughts

The world is changing at a rapid pace, which has only got faster over the past year.

We now live in a world where working from home is the new norm – with the WFH option likely to remain alongside a home/office hybrid.

The cloud, shared platforms, automation and rich reporting features are helping us all work together smarter, wherever we are.

But when you have insights available to you, that’s when you can truly make sense of what is happening around your business, be it new regulations, recent social and economic shifts, or technological developments and innovations.

Even if everything is changing around you, with insights you can remain forward-looking and forward-thinking, instead of reactive – able to consider changes as they emerge, always ahead of the game.

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