Consolidated financial statements: problems and solutions

Did you like our article?

The financial consolidation process of a holding’s subsidiaries demands a series of tasks involving different areas, companies, information sources, and moreover, different structures. Therefore, this process is not exempt of difficulties and high administrative costs. Some of the typical problems are:

• Absence of a central and detailed consolidation process in the company, understood as a procedure.
• Lack of a governance tool providing traceability of the different processes involved in the consolidation, and which facilitates a centralized visualization of the processes’ status or the completion of spreadsheet inputs, for example, so that difficulties may be pinpointed quickly. When this is not possible, the consolidation process will not be completely auditable, end to end, nor may information be controlled.
• The consolidation process involves handling different data sources. In some cases, the financial information is in SAP ERP®, but some companies do not have it or use different tools. For this reason, these processes require coordination and communication protocols which tend to generate a high administrative burden. In addition, the backends may not have standard financial statements, such as revenue statement and balance sheet. All of this limits the possibility for a centralized analysis of the group’s different companies.
• Finally, the coordination of this process is often assigned to a few, and even though this might provide for better control, it is not error-free and requires a tool to diminish the great workload associated.

SAP solutions

Throughout its history, SAP has made available different tools to support financial consolidation processes:

• EC-CS (Enterprise Controlling – Consolidation System), included in ERP SAP for many years now.
• SEM-BCS (Business Consolidation System), a derivation of EC-CS integrated into SAP Netweaver Business Warehouse (BW). For many, the best product in the history of SAP’s consolidation solutions.
• BPC (Business Planning and Consolidation), a tool acquired and enhanced by SAP. It is not natively integrated into SAP Netweaver as the former, but has a series of advantages, such as a new look and feel, and collaborative work features. It also provides an intuitive visualization of the consolidation processes, with a centralized status monitor that is UX oriented (User Experience). However, it lacks the former’s strength for the process itself, or the possibility to register annotations. On the other hand, it implies extra costs, since the landscape must be expanded, as with SEM-BCS, for it requires a BW instance.
• With the introduction of SAP HANA, in-Memory processes are enhanced, allowing SAP to make BPC also available for S/4HANA and BW/4HANA, with RTC (Real Time Consolidation). This accelerates processes, with a centralized visualization of information, materializing the usage of “hot data” and different analytical tools, such as AFO (Analysis for Office) within BO, for example.
• As of S/4HANA version 1909, SAP has released the product S/4HANA Finance for Group Reporting, a tool that strengthens the use of the classic EC-CS, included as a module in SAP ERP for many years now. Using the Universal Journal (new HANA tables such as ACDOCA, ACDOCC, MATDOC, among others) and a Fiori look and feel, it is possible to unify two vast worlds that used to be distant in backends and which drove companies to acquire several other products.

For these reasons, there is no easy answer when having to decide which product is the best choice. Different strategic decision-making, accounting decision-making, operational, contingency, and IT variables must be considered. That is, opting for one alternative requires a detailed analysis of each one of your company’s realities, and it becomes important to have a partner who knows the history and product features, with verified experience in implementation projects and a robust team for guidance in this type of decision.

We can help you. Contact us.

Feedback/discussion with the author: Luis Sasmay, Pre-Sales Novis Consultant.