Blog part 3: I use my GL/ERP for Consolidation today – why change?

 

I must admit that this question is the most intriguing one for me.  In order to answer this question honestly and with the utmost integrity (remember that I am in the Corporate Performance Management (CPM) software space) I would have to qualify my answer (like any true accountant would) and say “It depends”.  

Let me take a few moments to explain what the “right” answer is in my eyes to this question.


Answer 3A: Your organization has one GL/ERP system.  All entities in your organization use this system for transactional data entry.  Any operational systems that you required to run your organization properly is fully integrated with your GL/ERP system.

Let me caveat this answer – very few organizations can actually say that they have one GL/ERP system that they fully use to support what they want or need out of a consolidation solution. That being said read answer 3A keeping this in mind and I will explain later why this is the case.

 
My honest answer is – DON’T CHANGE!!! You are lucky to be in this situation and there is no need to overcomplicate things. Continue to leverage the GL/ERP system with all of the rich detail residing within it and perform your consolidation and other close process items within the application.  Count your blessings, continue to live in your “utopia” and enjoy what should be a seamless consolidation close process.


ANSWER 3B: If you are not in situation 3A (read my italicized warning) then what is your best option?  My honest answer is – you need a CPM solution for your consolidation needs.

I am going to spend the rest of this blog section’s allotment explaining 2 things.
1.    Are you truly in this “utopian” world with your GL/ERP system?  (This will help explain my italicized warning in answer 3a.)
2.    If I am not in this “utopian” world then why do I need a CPM solution for my   consolidation needs?


The Elephant in the room – many organizations that think they are in this “utopian” world are not. In order to help these organizations better understand whether they are truly in this state or not I would like you to review the following list of items and honestly answer yes or no as it relates to your organization. The existence of any “yes” answer for your organization means that in my eye’s your should be looking for a CPM solution to accomplish your consolidation/close requirements.


Utopian DISQUALIFIERS:

 

  • Mergers and Acquisitions – is this something that your organization explores/enters into on an annual basis?  If so then I doubt your M&A strategy includes a caveat that you only enter into these transactions IF the other organization has the same GL/ERP system as you.  Correct?  So each time you enter into one of these transactions then your Utopia disappears.  Sometimes it only disappears for a period of time until you can take the acquired organization and change their underlying GL/ERP system to your system.  This migration can be tedious and lengthy and expensive not only for an IT cost perspective but also from a retraining of staff perspective.  Regardless, it also means that you are probably performing manual work arounds and leveraging manual controls to complete your consolidation under the guise of your corporate GL/ERP system.
  • Are your operational systems truly integrated with your GL/ERP system?  IF you are using a separate revenue, inventory management or fixed asset subledger system and monthly there is a batch entry that posts to your GL/ERP system then you don’t have a truly integrated process? During your consolidation/close process do you have the level of detail required to complete your month end?  Do you find yourself incorporating manual tasks to get the appropriate detail and perform these tasks outside of your GL/ERP system (excel)?
  • Are all of your entities actually using the GL/ERP system as their back end transactional data entry system?  Or are they just monthly posting their trial balance into the GL/ERP system so the ending balances are there to start the consolidation/close process?
  • During any given month end close process, are you able to take your GL/ERP system offline and have it run month end consolidation specific processes/procedures thus sacrificing the ability to conduct daily data entry duties such as A/R, A/R, cash deposits etc?


As you can see these are just a few of the questions that will allow organizations to see that the paradigm they live in is very different than what they thought they had.  

Why would you then want to have a true consolidation system in place instead of just using your existing GL/ERP system?  Very simply put, if you answered yes to any of these question then you are not actually completing your consolidation entirely in your GL/ERP system. You have in one way or another built manual work arounds or manual checks and balances to keep your close process integrity. These manual work arounds are not efficient and leveraging a true consolidation system will help your organization in the long run.



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