FinanceSeptember 19, 2019

Which consolidation system is the right one for me?

For more than 15 years, I have been promoting projects in the area of consolidated accounting with my clients. Most projects of this kind start out with the same idea. The idea is: "We need a new consolidation system", followed by the question of: "Which system is the best one for us?"

Have you ever wondered the same thing? Let me tell you that it's the wrong question, or at least the wrong time to ask it. Instead, start out by answering a few other questions before deciding to introduce a new consolidation system in the first place.

The truly important questions are:

  • "What do I want to improve about my financial statement process and its results?“
  • "How to I want to achieve this?"
  • "What requirements do I have for system support?" and only then
  • "Which system support is optimal for me based on these answers?"

Of course, it's more fun to pick a new system right away and to buy it instead of going through the tedious analysis of the current processes and structures first. We like to believe in the provider's promises that a new solution alone will make all issues – no matter their kind –disappear. We will take the time to implement and process the above questions later. A consultant can do that. The author of these lines does approve of the latter.

So let us first deal with the question of: "Which system is the best one for me?"

The most frequent reasons for introduction of a new consolidation system

What is usually the catalyst for "we need a new consolidation system"?

In my experience, the most common reason is actually comparatively simple: most of the systems used in a corporate group have been used for a long time. They are consolidated and often have long ceased to be serviced and developed further by the provider. Of course, that is a mandatory argument to replace the system in a prominent process such as compilation of the consolidated statement. Important examples include SAP ECCS and Hyperion Enterprise. SAP BCS and HFM will probably soon join them.

The second-most frequent reason is dissatisfaction with the process of compilation of financial statements, which is characterized by many manual activities and secondary calculations in Excel and also often prone to errors. Where reporting is concerned, you will only receive static and bleak Excel reports from your system. The system providers promise improvement here. The consolidated statement will be automated or, as the spirit of the times now calls it, digitized. Digitalization can be sold much better internally as well.

I have already mentioned the last reason. Why start an exhausting process re-engineering project if all you need to do to avoid it is to buy some new software?
Let us leave it at this regarding the reasons for the questions to be asked, or not to be asked, in advance. Once the decision to introduce a new system has been made, it needs to be selected. That is best begun with an overview of the different system providers and trends on the market.

Trends on the market of the system providers

First generation

There have been multiple innovation waves since introduction of the first automated systems for the consolidated statement. Do you still remember systems such as PC Konsol by EY? At the time, Excel packages were emailed out for that and similar systems, completed manually, read in centrally and errors were coordinated by the group in consolidated accounting.

Second generation

The next system generation permitted online recording of figures, online validation, online IC reconciliation and automatic upload of the figures into the consolidated system. These solutions were a great step towards digitalization of the consolidated statement. Manual steps were removed. Errors were noted by the originator and group accounting no longer had to chase down every single error but would control and review only the process. All of this was already possible more than a decade ago with systems such as SAP BCS, HFM and Cognos Controller. These systems mostly automated the elimination and changes in the consolidated group.
If your processes can still offer this, your current system is not your issue, if you get my meaning. If you are still using old systems such as SAP ECCS or Hyperion Enterprise, please call me.

Third generation – the trends and innovations of the current system generation

The most obvious improvement is in usability. Modern systems simply look better and can be operated more intuitively than, for example, SAP BCS, which was presented to us with the usual and beloved old SAP GUI. What is the benefit of this? It's difficult to measure. But there is no question that users love a system with a modern interface that can be operated (more) intuitively and is designed well-structured. You may look forward to this!

High-performance reporting with Business Intelligence

The new options in reporting can be described more specifically. Today, all modern systems permit setup of online reporting in the web, to be used on any end device. This makes the board happy and the people in the engine room of group accounting even happier. They can now generate any analyses and answer any ad-hoc requests quickly and with little effort.

In order to provide this high-performance reporting, the providers rely on in-house business intelligence solutions (such as SAP with Business Objects) or are open for the market standards of the established BI world (e.g. Qlik, Tableau, Cognos, MS Power BI). The latter improves your freedom and enables you to use the BI tool strategically placed in your group. The CPM platform by CCH Tagetik is one of the few solutions that are open for all solutions on the BI side 

Performance management platforms bring together what belongs together

With high-performance reporting, we are looking at another strong trend on the market: provision of performance management platforms that map not only the consolidated statement, but also management reporting and planning. This reduces the number of required solutions in the group and therefore interfaces, complexity, effort and costs. Does that sound good? It really is! CCH Tagetik is one prominent representative of this strategy.

Disclosure management tools for automating the last mile

In addition to the BI tools, disclosure management tools are another tool category that we can find more and more often in group accounting. Such systems automate the last mile of reporting, from consolidation to printed final statements, drastically reducing the number of your sleepless nights and weekends worked through in Q1. Some providers of consolidation systems integrate such solutions (e.g. CCH CCH Tagetik). Special providers that will aid you in digitalization of the last mile can be found on the market as well (e.g. Amana and Certent). If the top management of your organization does not voluntarily read the reports online but prefers them in landscape format DIN A4 on paper or in their tablets, these tools will also help you transfer your figures into a thick PowerPoint folder on a monthly basis. Once you need to implement ESEF next year, this tool category will offer solutions as well.

Consolidation rules without programming

The next trend is another innovation in the engine room for you as the group accountant: the rules no longer need to be programmed in the system. Consolidation rules used to be programmed in complex scripts, which kept you dependent on your IT or – worse – consultants for any change. Urgent requirements had to be solved in Excel, which was time-consuming. Is this really necessary in times of digitalization? It is not!
Modern systems make it possible to set parameters in a way that the technical experts can learn to do directly. What Cognos Controller has been able to do for more than 10 years is now developed further successfully by market leaders such as CCH Tagetik.

Software-as-a-Service from the cloud

There is another trend from the USA that has reached continental Europe by now. All the essential providers offer consolation as a Software-as-a-Service solution in the cloud. It took a long time until groups in Europe decided to entrust their financial data to the cloud, but even renowned German DAX30 groups have joined the trend in the meantime. The floodgates have opened.

A paradigm change is happening from the point of view of IT. The effects on group accounting are minimal, however. You no longer need to convince your IT to operate another system for you.

Real-time consolidation in the ERP

A southern German ERP provider has been promoting another trend quite prominently for a while: (re-)integration of consolidation into ERP and real-time consolidation. It sounds great! No interfaces, no additional system, and consolidation at any time at the push of a button.
If the local financial statements in your group are all compiled in a structure that permits seamless transfer to consolidated accounting, and if all companies of the group are mapped in that single ERP system, call me to introduce real-time consolidation at your group. I would enjoy that. However, I have started to lose hope that I will ever experience this. There's no harm in dreaming, though ….

Large versus small
Beyond the system generations, the market is divided in another way as well. On the one hand, you can find large international providers for which you will find know-how in many markets. They offer other essential processes in the group's performance management to supplement consolidation as well (see above, "platform"). I have mentioned these providers in the text above a few times.

On the other hand, there are specialized providers on local markets that offer a smaller scope of functions but that do have usable consolidation tools. Introduction of these systems usually comes with smaller investments. I don't want to keep this information from you. That is why IDL and Lucanet are spread widely among smaller groups in Germany.

This brings us right back to the initial situation: What requirements does your system need to meet in addition to the strict function? Is a small tool from local providers enough? Is dependence on IT your main issue? What is your corporate philosophy when feeding data into a cloud? What do my current processes look like? Then we will face the challenge of finding out which system truly is best for us.

Markus Nocon Foto
Senior Partner - 4C GROUP AG

Markus Noçon advises his customers on all aspects of corporate controlling and has a pronounced love of accounting. In addition to the organization of accounting, he designs contents and processes of group reporting. At 4C GROUP AG, he looks after his customers in the Competence Center CFO Office since 20 years and is happy to drive business development forward in this area.

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