Financial Statements: Focusing on the Value-Add

What if you had a full-time assistant who could take all the administrative headaches out of your month-end closings? That would leave you with a lot more time to spend on high-value strategic activities. With the right approach to consolidated financial reporting, that scenario is well within reach.

Producing financial statements today is generally fairly burdensome. First, there’s the typical collection of month-end adjustments, worksheets, and account reconciliations. That’s followed by a preliminary review of financial statements, some research into numbers that don’t look quite right, then another round of adjusting entries.

When you’re dealing multiple entities within a group company, the usual challenges of the month-end close are compounded even further. You’re chasing down the finance lead at each of your subsidiaries, struggling to make sure everyone is staying on task. Inevitably, there are loose ends that must be tied up along the way. There are simply too many interactive dependencies along the way, and inevitably, things fall through the cracks.

Integration and automation offer an opportunity for improvement. While buzzwords like “robotic process automation” (RPA) may sound very high-tech, anything that eliminates the need for human intervention fits that description. In fact, automation today is easily within the grasp of small and midsize firms. Month-end closing processes are an ideal place to start. It’s low-hanging fruit, especially in the case of group companies that wrestle with the challenges of consolidated financial statements every 30 days.

Let’s look at the current process: Get the finance leads at each of your group companies to dump the summary trial balance to a spreadsheet, along with an income statement and balance sheet. Spend the better part of a day copying, pasting, and re-formatting that data in a single Excel file. Check your formulas, add eliminations and currency adjustments, then wait for any potential last-minute changes from the subsidiaries. Review the numbers, get updates from the subsidiaries, and triple-check everything at the end of the process.

It’s tedious and error-prone.

Now compare that with an automated process: Live data from the subsidiaries is pushed to a centralized ledger in real time, without any human intervention. That includes transactional detail, so currency adjustments can be performed in full compliance with GAAP & IFRS standards. Eliminations and currency adjustments are entered in that centralized ledger, and any updates from the subsidiaries automatically show up there as soon as they happen. Adjustments to country-specific GAAP vs. IFRS standards are entered there as needed.

For the central finance office, it’s now just a matter of generating financial statements, – for any group company or combination of companies, in a range of different formats, in GAAP, IFRS, or other standard.

Automation removes a lot of tedious effort, a lot of back-and-forth communication, and a lot of potential for human error. What’s left is an opportunity: The office of the CFO can focus on context. The finance team can concentrate their efforts on the things that inform strategic thinking. The human actors in this scenario are spending far less time on copy/paste activities, and far more on high-value activities.


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