Blog Part 2: Why pick/change Consolidation solution now?

Many organizations selected consolidation stand alone solutions some time ago whether this was in the 1980’s or 1990’s or even the early 2000 years. Many of these solutions are “still working fine” today or at least this is what I hear from these organizations when I talk to them. Quite honestly, accountants are creatures of habit when it comes to the close process and change.  If it is working why change it?  Also many accountant/finance departments are seen as cost centers and organizations try to spend valuable IT team time on other “more important” items such as customer facing initiatives and sales driving projects rather than “bean-counting” for after the fact activities that finance is perceived to be doing.

Can I argue with the items noted above? It is hard to argue some of these points while at the same time it can be very easy to argue these points as well. Rather than focus on a debate I think I will spend my time simply highlighting the areas of concern that I have when it comes to these existing consolidation solutions.

Concerns with existing stand-alone consolidation solutions:


1. Auditability – these applications do have audit capabilities and they are relatively good in this respect for when they were created.  The problem lies that many of these applications were created before many of today’s regulatory requirements were created.  In reality as true stand-alone applications they contain nowhere near the transparency and accountability required by today’s standards (whether they are Sarbanes Oxley [SOX] driven or even Frank Dodd requirements).  Many organizations have realized this and created manual work arounds, controls and checks to satisfy the requirements but once again these are done in personal productivity tools such as Microsoft Excel.  This means your current solution does not meet your needs but you have become complacent or acceptable to the manual work around solutions put in place.  Wouldn’t it be nice to have a consolidation solutions that truly streamlines the controls required for today without having to rely on Excel and all of its limitations noted in the earlier blog posting?

2. Process compliance
– Once again many stand-alone consolidation solutions did not contain true business process management capabilities. This was not required when they were first created.  In today’s regulatory world this feature becomes a must have requirement.  It allows organization to provide the transparency and visibility into the close process and provide detailed information on who has done what and when that is required for compliance purposes. Auditors will be very interested in this feature as they are required to meet SOX compliance criteria through PCAOB (Public Company Accounting Oversight Board).

3. Software limitations of older solutions: I talk to many organizations that have created many "work arounds" for their current consolidation point solution software limitations.  Many of these organizations no longer see these work arounds as limitations as they have simply accepted these as standard operating procedure.  It is disappointing to see such things take place and I wanted to highlight a couple of limitations in particular that I have seen that just shouldn’t be acceptable regardless of your particular situation:

a. Rolling over from year to year – some current software solutions do not roll over year-end income to opening retained earnings automatically.  Many organizations create a one-sided (unbalanced) journal entry to correct this.  Others have created a custom process so that this is automatically done but it is not part of the standard software code and thus upgrades are sometimes ignored or avoided in order to avoid reworking such customizations.

b. Intercompany eliminations – many current software solutions force organizations to use specific elimination entities in order to accomplish intercompany eliminations.  Why would you want to create fictitious entities in your organization structure just to accomplish a consolidation requirement? This is something that you have to do in Excel by putting your elimination in a separate column for reporting purposes but why would a consolidation built solution force you to do this?  What happens when you have to change your organizational structure?  What happens when you need to create an alternate consolidation structure?  Do you have to recreate these fictitious entities for every reporting structure?  OR does your organization accept doing eliminations at the top of the house level only in order to avoid this additional work and maintenance? As you can tell I am not one that accepts this thought pattern and I don’t think that this is acceptable in today’s world.

c. Ownership structure changes or ownership percentage changes causing consolidation methodology changes – many software solutions that are worth the money can properly handle these situations “out of the box” which means no custom coding and it is simply a configuration change in order for the software to start applying the correct mathematics and logic to the new consolidation situation.  The biggest shortfall in most if not all of these solutions comes when you consider reporting requirements.  What if the situation is only applied prospectively but you want to have the ability to report on the old structure for historical periods side by side with the new structure for the current and future periods?  Many software solutions start bringing up terms like “frozen historical data repositories or cubes”.  This means that you require IT resources internally or external consultants in order to accomplish this.  OR you need to have special reports built by a trained technical resource in order to accomplish your requirement.  Once again it leads to an expensive solution to a common and simple consolidation requirement.  Shouldn’t this be part of your purpose built stand-alone solution?

d. Reporting – I already mentioned some reporting deficiencies above but unfortunately this is just the tip of the iceberg.  Many solutions today require some strong technical resources for report building purposes.  This should not be the normal.  Finance folks should be self sufficient and capable of building their own reports.  Reports should be available in a real time nature with real time in memory processing in the software allowing you to get reporting for one offs or new structures without having to wait for an IT calculation process to run or for an “IT maintenance” window to pass. In my eyes this was an acceptable item when I first started my accounting career but it should not be something that we as accountants have to accept today.

e. Consolidation – can you consolidate your system or run a consolidation in your system if users are in the system?  Do you have visibility in the consolidation process and what has been done so you know if you are able to run the consolidation? Why do you accept this limitation in your software when it is supposed to be your organization’s system or record for reporting?

There are probably many more items that I could list out but I wanted to avoid this sounding like an attack on some software solutions.  I simply wanted to point out the top items that really frustrate the accountant in me. I wanted to point these out to make others realize that while these “work arounds” were acceptable in the past, finance departments no longer need to settle with these in today’s technologically advanced world.  

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