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The consolidation and reporting trap

21st Aug 2014
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AIA

For some time now, ERP companies have been promoting their systems as multi-company, multi-currency offerings, writes CEO of PrecisionPoint Michael Evans. However, reporting has entailed:

  1. Extracting trial balances from each company at period end to a specialised consolidation product
  2. Or dumping all the reporting company trial balances to a series of spreadsheets

In either case, the resultant information is somewhat limited and most will have to engage in parallel exercises to deliver meaningful analyses of sales, inventory, procurement etc.

It is not surprising that there is a real appetite for immediate performance information, ideally delivered on a daily basis. The bigger surprise, however, is that very few ERP systems address this need, offering consolidation at summary trial balance level only at month end. Relevant data is now held in one system, but it is not in a form that is useable and to get accurate operational performance information, companies will need to rely on an additional BI or reporting system.

So, if you have already fallen into the consolidation and reporting elephant trap, how do you go about plugging the gap?

Either:

  • Employ highly paid accountants to build and run manually a massively complex spreadsheet system
  • Deploy a BI tool that has been developed specifically to handle this task

BI is definitely the way forward, but not any BI will do.

  1. Sub-ledger integration - It is not sufficient to consolidate only the Trial Balance as the performance data is contained in the sub-ledgers
  2. Chart of account mapping - Very few are able to impose a standard chart of accounts across all operating companies so it is vital that the BI system offers a simple to operate mapping tool to compare like with like
  3. GAAP compliant currency translation - It is vital for the BI to replicate a policy for the translation of foreign currency results at a detail level
  4. Import of external data - It is usual for some data and even some companies to stand outside of the ERP framework, so facilities to import data must exist
  5. Complete audit trail - Consolidation systems are subject to audit and the ability to prove any number is important so the BI system must be able to break any number down to its most detail constituent numbers
  6. Hierachy management - Organise all dimensions as end-user functionality
  7. Report writing - The BI must offer an end user report writing capability
  8. Daily reporting - Does the BI system provide a multi-company view from any angle to any analytical depth or does each request for information require an ad hoc project?

A successful implementation will require the BI supplier to embed a lot of accounting intelligence in their solution. If it is not there, expect hard work to make the system truly useful. 

Michael Evans, CEO, PrecisionPoint, started his career as a chartered accountant with Ernst & Young. 

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