The preparation of financial reports and consolidation of data presents various challenges, especially for holding companies. These organizations, which comprise multiple subsidiaries and business entities, often operate across diverse industries and geographical locations.
As a result, they face obstacles in streamlining and standardizing the reporting process, while ensuring accurate and timely data consolidation. The issues can impact decision-making, regulatory compliance, and stakeholder communication.
Common data consolidation and reporting challenges faced by holding companies
Disparate systems. With multiple subsidiaries operating under a single umbrella, these organizations often utilize a variety of databases and platforms, leading to inconsistencies and complexities in data management. The lack of standardization across systems complicates the extraction and unification of information, making it difficult to generate comprehensive and accurate reports.
Data unification. A wide range of data in various formats and standards needs to be brought together into a single, coherent format for reporting purposes. It can be problematic because reference data can vary from one subsidiary to another.
To address this issue, holding companies must implement a comprehensive Master Data Management system that can harmonize and standardize the data from various sources. This system should be capable of normalizing and distributing unified data, enabling the organization to create accurate and consistent reports.
Data transformation is a vital aspect of the data consolidation and reporting process for holding companies, particularly when adhering to specific reporting standards, such as IFRS. This process involves converting raw and local data into a format that complies with the chosen reporting standard for the entire group of companies.
To ensure consistency and accuracy in the transformation process, it is essential to establish a set of rules that guide the conversion of data. These rules must be stored in a database in a clear, easily interpretable, and repeatable format, as they are crucial for maintaining regular reporting.
Intra-group operations. The following operations must take place in holding companies to ensure accurate financial reporting:
Reconciliation of mutual settlements, which involves adjusting the financial records of subsidiaries that have conducted business with each other. This ensures that profits and expenses are accurately reflected across the entire group.
The elimination of intra-group turnovers. This process requires holding companies to accurately calculate the shares of unrealized production when one subsidiary produces goods and another one purchases them. If the purchasing subsidiary has not yet sold or consumed the goods in production, the producing subsidiary may have already recognized these funds as profit.
How to improve the management and consolidation of financial data with the help of CPM software
Corporate Performance Management (CPM) systems, such as 1C:Perform, offer a wide range of functionalities to streamline the management and consolidation of financial data. These are:
Integration. 1C:Perform is powered by 1C:Enterprise low-code platform, allowing for seamless external integration with various systems that support ADO (ActiveX Data Objects) such as Excel, Access, MS SQL, and web services.. Furthermore, it supports out-of-the-box seamless integration with other 1C:Enterprise-based ERP systems, such as 1C:Drive and 1C:ERP.
Master data management. 1C:Perform centralizes and unifies necessary reference data, ensuring cleansing, harmonization, and elimination of duplication of master data from various external sources. It also facilitates the centralized management and approval of changes in the corporate reference data.
Consolidation. The system enables the import of data collection forms from external local accounting systems for consolidation processes. It also automates the reconciliation and elimination of intra-group turnovers, as well as the transformation adjustments in accordance with IFRS, including accruals and deferred taxes.
Additionally, 1C:Perform supports the preparation of documents for parallel accounting in accordance with IFRS in areas such as fixed assets, loans, financial instruments, leasing, and investments. This ensures that all financial transactions are recorded and reported consistently across the organization.
Compliance. The system facilitates the preparation of a company's standard reporting package, ensuring compliance with IFRS and the ability to customize the reporting process according to other required standards.
In summary, 1C:Perform is a comprehensive CPM solution that simplifies the integration, management, and consolidation of financial data, enabling companies to effectively navigate the complexities of financial reporting and maintain compliance with various accounting standards.