How and why should a company with multiple core financial systems go about consolidating on a single system?
There are several reasons why companies would have multiple core financial systems: merger and acquisition activity, multiple geographies, multi-tiered business structures, or integration of accounting, tax and complex compliance issues.
Companies that have acquired multiple core financial systems over time due to mergers and acquisitions must have a consistent view of all business activities. Although the easiest short-term solution is to simply consolidate financial information at an executive level of reporting, companies should not use multiple systems to track financials for similar business units on a long-term basis, as the disparities in reporting and closing the books drive different business practices and take a toll on corporate operations. Keep in mind that finance and accounting departments exist to support and track operations and should not create obstacles to consistent processes and business practices.
To successfully merge financial systems to support a consolidated business environment, companies should do the following:
1. Map accounting practices and processes within all core financial systems, including revenue recognition, purchasing and expensing events, closing activities, and relevant governance, risk management, and compliance assumptions.
2. Once these accounting practices have been determined, check for discrepancies between similar processes in each financial system. It may be that one or more systems create bottlenecks that can be avoided by choosing a newer or more efficient financial management system. Alternately, you might find that some of your current financial practices are based on outdated compliance issues that have been superseded by new legislation or internal controls.
3. Choose a consolidated system that takes your company's IT roadmap into consideration. If your company is mobile-friendly, make sure that the system has mobile apps across multiple platforms. See if your intended solution supports cloud, on-premises and hybrid cloud deployments to provide technological flexibility. And if your company depends on collaborative technologies to close on a monthly, quarterly or annual basis, see if these can be embedded into your new system.
4. Look for multi-language and multi-currency support that adequately covers your entire organization. Although business English and standardization on the US dollar or euro are often sufficient to support highly-educated financial managers, localization is important to support business managers who handle your day-to-day operations around the world. Ideally, your system will have language-, currency- and region-specific compliance support either as a current or roadmapped capability.
Multiple core financial systems are also often associated with multi-tier ERP deployments where each business has different accounting practices that are not easily reconciled. In this case, successful consolidation of financial systems actually depends on two things. First, the company needs to confirm that either strategic or operational accounting practices will change to support consolidation. If not, does the company want to move to a robust financial management system that can handle highly complex and global financial models?
If neither of these conditions is true, consolidation might be a bad idea because the company has not gained the necessary internal willingness to change. And the will to consolidate is nothing without the will to prepare for and accept change.
About the author:
Hyoun Park is a founder and Principal Consultant at DataHive Consulting. He focuses on the intersections of social media, big data and human insight to develop enterprise technology solutions. For the past 20 years, Park has focused on harnessing the transformative power of the web, social media, enterprise mobility and the cloud while responsibly sticking to a budget. Follow him on Twitter @hyounpark.