10 Signs Your Consolidation

System Needs Updating

Turning Consolidation Systems
Into Business Assets

Research Perspective
Sponsored by

Aligning Business and IT To Improve Performance

Ventana Research
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Copyright Ventana Research 2012

Do Not Redistribute Without Permission

Ventana Research Effective Technology Accelerates Closing and Reporting

The Need for a Faster Close

Most companies need to accelerate their accounting close. Our recent
benchmark research found that, on average, companies take longer to
complete this process than they did five years ago: 8.0 days vs. 7.5 days for
the quarterly close and 7.2 days vs. 6.5 days for the monthly one. Only 38
percent of research participants reported they complete their quarterly close
within five or six days, down from 47 percent previously.
We have identified three key factors that determine how quickly a company
closes. One is how well the process is designed and executed. The second is
how well the company manages data. Both of these are connected to the
third: the software used to support the closing process. Moreover, how
quickly a company closes its books affects its extended close, the full span
of activities that continue into internal financial and managerial reporting and
external reporting and filing.
Especially for companies that must tag their periodic reports for the United
States Securities and Exchange Commission (SEC) and other regulatory
agencies using eXtensible Business Reporting Language (XBRL), an
accounting close that takes too long puts additional pressure on the finance
organization because it leaves less
time to assemble the text and data
Only 38 percent of
into a final document, perform neresearch participants
cessary analyses and ensure accuracy.
reported they complete

their quarterly close

Our research shows that a dedicawithin five or six days,

ted consolidation tool can complete
the extended close process considown from 47 percent
derably faster than spreadsheets
previously.
and can provide important capabilities that ERP systems lack. But this
doesnt mean that all such consolidation tools are equal. Even companies
that currently use dedicated consolidation software should consider replacing
it if it is no longer performing as well as they need it to or doesnt help them
improve their extended close process.

Reasons To Replace a Consolidation System

Our research shows that companies change their consolidation software
infrequently. We estimate that on average companies replace them every 11
years. The longevity of these systems reflects on one hand the maturity of
the application category and on the other the propensity of finance
departments to change core software only when it performs so poorly that it
threatens to disrupt the orderly execution of the business. Before that
happens, however, the department usually encounters a mounting number of
indicators that not all is well. In the case of closing and reporting, 10
common indicators signal that consolidation software is nearing the end of its
useful life. Consider which of these exist in your organization.
1. Your monthly or quarterly close takes more than six business days.
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Ventana Research Effective Technology Accelerates Closing and Reporting

2. The close takes as long and requires the same number of resources
as it did five years ago.
3. You can meet some statutory and financial reporting requirements
only by using spreadsheets.
4. The consolidation system has been highly customized to support
your requirements.
5. The system has been modified to support functions it was not
intended to perform (such as planning or management reporting).
6. Upgrading to a new release of this system would be as costly and
resource-intensive as starting from scratch.
7. The system does not support recent releases of commonly used
operating systems, Web browsers and Microsoft Office.
8. The product is no longer on the vendors strategic roadmap or will
not receive further enhancements.
9. If your company must file periodic statutory disclosures (such as
the SECs 10-Q or 10-K), the system cannot automate the creation
of these documents.
10. The software does not provide a complete audit trail from the
financial close through final disclosure.
Rather than waiting for the close process to deteriorate further or become
critical, consider whether efficiency gains alone may justify replacing the
software your company uses to
manage
its accounting close.
Even companies that

currently use dedicated

consolidation software
should consider
replacing it if it is no
longer performing as
well as they need it to
or doesnt help them
improve their extended
close process.

Some finance executives may not

understand that there are links
between these indicators and the
technology limitations of their
existing software. For example,
some older consolidation software
handles only a limited number of
dimensions. (Dimensions are ways
of defining business data in terms
of business units, geographies,
products, customers, currency or
time, to name some of the most
common.) Because of this
limitation, companies are forced to devise work-arounds that initially may be
acceptable but ultimately slow the systems performance. Having the ability
to define the business using many dimensions makes it easier to view and
analyze data from multiple perspectives such as regions and product families,
or quickly construct pro-forma performance analyses after a merger or a
reorganization of territories or product lines. It also facilitates the
simultaneous creation of multiple reports covering management and
statutory accounting (in the latter case, both US-GAAP and IFRS).

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Ventana Research Effective Technology Accelerates Closing and Reporting

What To Look for in Consolidation Software

If, having found some of these 10 indicators, your company decides it is time
to investigate replacing your existing software with a tool more capable and
up-to-date, we advise the finance organization to apply these evaluation
criteria:
It can be owned and managed by Finance. When Finance has direct
control, its faster and easier to make necessary changes,
improving the departments effectiveness.
It offers features such as flexible workflows to manage the process
and automate data collection. Closing, like any manufacturing
process, benefits when it is executed consistently, using automated
hand-offs between participants controlled by those administering
the process so they can easily monitor progress and quickly spot
issues.
It supports mobile computing and business collaboration.
It is compatible with the latest version of Microsoft Office.
It conforms to multiple reporting requirements (such as multi-GAAP
and management) from a single database. This enables companies
to create reports sooner using fewer resources.
It is scalable to the needs of the business today and will be for at
least the next five years.
In addition, for companies that must tag their financial statements or other
mandated disclosure documents using XBRL, we recommend finding a
system that can execute all the steps of
the extended close process, from closing
An opportunity is at
the books to creating final disclosure dohand for your
cuments (including XBRL tagging), within a unified application suite.
company to gain

Taking Action

significant business
benefits from
having fully capable
consolidation
software.

If your close is taking too long, if it consumes too many resources, if your system requires more than a few workarounds to complete the close process,
or if it cannot manage the extended
close from consolidation to the completion of external financial reporting, its
time to examine whether better software to manage closing and reporting
may be necessary.
If the organization concludes that it is, an opportunity is at hand for your
company to gain significant business benefits from having fully capable
consolidation software. Indeed, if more than a couple of the indicators
mentioned above sound familiar, its probably worthwhile investigating the
capabilities of the latest version of your current vendors software as well as
what other software companies offer.

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Ventana Research Effective Technology Accelerates Closing and Reporting

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