Statutory consolidation and management reporting: Weighing the pros and cons

Why the need to integrate statutory consolidation and management reporting into one system? Well, most international groups have already taken the first steps in unifying statutory consolidation and reporting. But for those who haven’t yet, this blog post will look at the why’s and how's, with expert advice from Benjamin Steadman, Senior Manager, CFO Services, Deloitte Consulting.

One of the biggest advantages of unifying this process is that there is a rationalization in the production of financial information, which results in quicker timeframes and a higher quality of financial information, while effort and cost are greatly reduced. There’s also another unseen benefit: a financial department able to present their results on time ensures that processes are swift and efficient.

First, let’s look at the cons

Our teams intervene a lot when it comes to implementing unification projects, and we do notice that there are different kinds of triggers to start this process. See the three main situations:

1. The financial director of the group is confronted with an increased request for financial and operational information, coming from the management team, operational managers, stakeholders, banks, or regulatory institutions. That’s why the group needs to present more information of high quality and with shorter deadlines. Next to the regulatory statutory reporting, groups more frequently opt for monthly reporting because it responds more to the reactivity that is being asked from the operational teams that need to make decisions in an always changing environment.
2. The financial manager needs to deliver more types of reporting: tax reporting, forecasting, cash flow, management reporting whereas a non-unified process leads to more manual entries and heavy reconciliation to ensure the coherence of the data. Also, the technical architecture is becoming too complex to adapt on short notice.
   
3. The information system in the group is not accurate anymore. The group evolved in the latest months/years and the system did not evolve with those changes. The information system is becoming a constraint for the finance teams: the system is not evolving with the group, use of different systems next to each other is needed to deliver the required information, the architecture is difficult to maintain (versions) and has performance issues. The risk for the financial director is that they are not capable of delivering the requested information within the requested timeframe.

The above points show why groups choose for a unification of the different processes. But what are the concrete advantages?

Let’s look at the pros

The ultimate goal of unifying statutory consolidation and management reporting is to increase the efficiency of the finance teams. Also, the internal control will be augmented and the closing time reduced.

Here are some of the benefits:

• You get a better quality of information because it comes from one unique and reliable source of information
• The information is based on the same hypotheses and the same methodology, meaning that the financial indicators are more coherent
• The information is available in one unique channel to adjust and produce the financial statements.
• This process results in less validation, less intercompany transactions and all information can be found in one solution
• An opportunity to adjust the internal information and to gather different teams
• A more unified team ensures that annual tasks are balanced, and activity peaks can be avoided
• Reduction of the efforts: unnecessary entries are replaced by one single entry and more accurate data
• The efforts that the group requires from its entities are more streamlined and less redundant
• Using one single IT tool reduces the costs for license and maintenance.

This unification also means:

• More coherence in the request to the entities of the group: the entities have one single interlocutor to report the information
• Once the team is unified, only one report needs to be done to the operational teams and management (more coherent information and simpler to analyze)
• The group benefits from one unique team for the production and analysis of the reported data
• The role of the CFO as business partner will be reinforced.

The advantages are clear and the decision to go for one unified system is a structural choice for the group.