Modernizing Financial Consolidation, Close & Reporting

Published on
June 9, 2022

Take a run-through of the job functions that make up your accounting and finance team today. If you’re in the office, this may be as simple as looking up from your desk. For those working at home, it’s more of a mental exercise. Either way, the list of job titles will probably be pretty standard.

  • CFO? Check.
  • Controller/CAO? Check.
  • Treasurer? Check.
  • Risk Manager? Check.
  • Budget Analyst? Check.
  • Change Catalyst? Ummm . . .

Although it’s true that there’s no formal job description for a change catalyst, there’s nothing that suggests it’s a role that could be specific to finance and accounting. The salary range is an open question.

Whether you formally hire them or not, though, someone needs to be the change catalyst in the organization, and if you can assemble a team of them, well... that’s even better.

For those working in finance: This is particularly critical, and I have the data to prove it.

3 Common Financial Consolidation and Close Complaints

Fortunately for everybody, all of this information is available in a recent survey that Fluence conducted with mid-market finance leaders. Among other findings, we discovered that many are fed up with their existing financial consolidation and close solutions.

For instance, when we asked them to rate the quality of their software tools, only 19% described them as “superior.”    

Survey Results for Quality of Current Financial Consolidation Software

Unfortunately, this means that more than 80% of finance leaders continue to use legacy tools that force them to perform largely manual processes. These could easily be automated with a better selection of tools, and would be far less strenuous.

The strain this puts on finance and accounting teams is bad enough, yet sadly that’s not even close to the only issue our survey respondents cited.

Here are the top three problem areas in the finance systems our research uncovered:

Top 3 Problems with Current Financial Consolidation Software

1. Maintaining the system is more costly than planned

You pay for finance and accounting technology in many ways. It’s not just cash.

Even before you purchase and deploy a new tool, for instance, you (or your team) invest time in research. You may have to compare features, pricing and other factors from a laundry list of possible vendors. Meeting with potential partners and planning an installation eats up more hours.

If the software doesn’t work as expected, then you end up suffering the cost of lost productivity, missed deadlines, errors... all which hurt your profit margin and your team’s reputation.

Now add unexpected maintenance costs on top of all this; it must be hard to not feel like you’ve made a big mistake. You might also be tempted to think this is just the way these tools work. That isn’t true, and it’s time to recognize that.

2. Data is hard to integrate with other applications

Too many of those in accounting and finance have become the business equivalent of a hunter-gatherer. They are digging among all kinds of buried treasure across the company to find numbers that matter; data related to intercompany matching, eliminations and more are all in the mix.

To make matters worse, working with the applications that hold this data is very similar to approaching a series of locked doors. The keyring may be right on your fingertips, however, the number of keys is far too much and definitely too confusing.

The ideal state for a tech stack is more like an open concept office: You can see where everything is at a glance. Getting around is easy because the floor plan was designed to be navigable.

It’s just as important to recognize that most companies are nowhere near done with digital transformation.

Problems With Integration with Current Financial Consolidation Software

As you make more investments, launch new lines of business and acquire new companies, more applications and platforms will enter the mix.

If integration with your financial consolidation and close software is a problem now, it will get worse. However, make sure to remember that it doesn’t have to be this way.

3. The system is hard to use, so adoption rates are slow

When you’re shopping on Amazon, there’s nothing like the instant gratification that comes with the ‘buy now’ button. Things like downloading the average personal banking app are pretty quick now too. It’s not very hard to log in and have your account details presented to you almost immediately.

The learning curve for these tools is similar to the concept of instant gratification and the Amazon ‘buy now’ button: It’s really just a flat surface. The companies involved had realized then that no one was going to search through their FAQ page or knowledge libraries. It’s kind of impossible to imagine asking someone to download an owner’s manual for most consumer software.

So why, might you ask, are the tools we use to manage financial data head-scratchingly difficult to understand? They should be even easier than consumer tools, and at the very least they should connect to user interfaces we know and recognize.

It’s no secret that finance teams have been dealing with all three of these challenges for quite some time. This can also be why finance teams alone haven’t been able to inspire change catalysts to emerge. In this case, the real business drivers point to even larger problems.

What Finance Needs for Truly Superior Consolidation, Close and Reporting

You’d think that taking numbers from raw data to insight business leaders is supposed to look like a straight line. In practice, it’s actually more similar to the kind of zig-zag someone would see in a maze.

Those in accounting usually can’t move forward with the close without emailing a colleague. In most cases, they may also have no choice but to chase them through phone calls and text messages if they don’t receive a timely response.

Although traditional enterprise software may offer a solution in theory, in practice it’s simply presented a new set of challenges, especially for mid-market companies.

Poor financial workflow was cited as the top reason to modernize existing consolidation and close software, while inadequate template building was close behind. If you feel like your team is starting the process from scratch each time when working on a platform, this is probably why.

2 Challenges Mid-Market Companies Face with Traditional Enterprise Software

Both of these reasons point to the same need. Finance can only serve the businesses with tools that are tailored to streamline and enhance the way they work.

This means that...

  • Instead of rigid structure, applications should offer drag-and-drop capabilities.
  • If some of their tasks are common during every close, they should be pre-built into the system.
  • They should be able to collaborate with their coworkers using popular tools like Slack or Teams.

How to Resolve Financial Consolidation Complaints from Your Team

Even if you’re nodding your head at all of this, the idea of of becoming a change catalyst might still be vague. To push for new technology can definitely feel like an uphill battle, but initiating the conversation will only help you win faster.

1. Connect Finance Modernization To Broader Organizational Changes

A recently published article by consulting firm McKinsey headline’s the gist of it: “If We’re All So Busy, Why Isn’t Anything Getting Done?

McKinsey suggested that organizations need to stop rewriting org charts with simplicity. He explained that instead, they should clarify decision-making roles and create room for higher-quality interactions.

It is known that you already understand the value a modern consolidation and close solution can add to finance. The rest of the organization will show more interest in understanding when they’re able to see how it can help quicken the decision-making process; its ability to minimize wasted back-and-forth across departments and make everyone more results-focused is something worth considering.

2. Show How The Next Wave Of M&A Can Be More Manageable

In EY’s 2022 survey of CEOs,

Survey Results for CEO's Pursuing Additional Financial Consolidation Tools

What may get lost in this discussion, is the difficulty in accounting for new acquisitions after a deal has been announced. Each new acquisition, investment, or other new entity can bring its own:

  • Chart of accounts
  • ERP system
  • Local currencies
  • Regulatory reporting requirements
  • Consolidation rules, and more

Change catalysts should be able to help explain how modern consolidation and close solutions can ease many of these hurdles. Indeed, modern consolidation software should allow you to add a new company in a single day, especially without tying up your accounting team in the process.

3. Advocate For Change Like A ‘Smart Contrarian’

Change catalysts may talk about technology, but they’re fundamentally dealing with people. It would be wise to take a look at Chengwei Lu’s the work of a behavioral economist under Harvard Business Review for some helpful insight on this matter.

Lu explained how many of those trying to make changes tend to fall into four traps: Focusing too much on an organization’s “elites,” ignoring cultural issues, stereotyping problems based on old metrics, and being a slave to dominant logic are all extremely dangerous.

Becoming what Lu referred to as a “smart contrarian” is much wiser and more helpful. Make your business case by consulting widely, including your organization’s “outsiders.” It’s also important to always look for potential facts that contradict what is currently accepted as wisdom. Finally, remember to be open-minded to a range of alternatives to the status quo, and the new ways in which they are logically-supported.

Asking tough questions when it comes to account reconciliation, financial consolidation or even the month-end close process can seem intimidating. However, this is important for growth. You might want to ask yourself...

  • What aren’t we doing with the resources we’re putting into manual processes now?
  • What aren’t we seeing with the attention paid to tasks that are easily automated?
  • Is there more that we could do if we modernized our software?

As a final point, we can’t stress enough on making use of all the research that’s available to you. If you want more statistics and insight, you can download our full report, The Roadmap To Modern, Mid-Market Finance. Beyond the data, you’ll find that the technology to solve the issues we’ve outlined in this blog (and many more), is already out there and ready for you.

The Roadmap to Modern, Midmarket Finance Report

Michael Morrison
Fluence Technologies

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