Record to report / R2R – General Accounting – Consolidations
We discussed consolidations as a back office process, and shared an example with you.
https://faoblog.com/processes-record-report-r2r-general-accounting-consolidations/
Some of you may wonder why we can anticipate challenges in this process?
The complexities and challenges come from a number of factors:
- Multiple systems – As I had mentioned in my example in the last post, migrating all entities to a common ERP / accounting system might be difficult and expensive, so the CFO’s office picks up this. Each system may have a different setup, including ledger account nomenclature.
- Multiple Geographies – There will be different taxation environments and laws in each geography. Synchronizing these are quite challenging.
- Foreign Exchange – The difference in applied rates for inter unit transactions result in a similar transaction being reflected at two different values, most companies budget a certain percentage amount and normally attempt to write it off.
- Goods movement – When goods move from one unit to another, they may be recorded at different procurement / transfer values. There could be losses in transit, throwing a mismatch situation
- Entity handling – this is another key challenge that I have seen, some entities do not respond with the data in appropriate time. They may have challenges, closing the period books, or it could be just a personnel situation as well.
- Legacy ERP – Legacy systems are prone to failures, which are multifold. This may hold up a unit for closure of books and extraction of financial statements.
Each entity has its own situation and the back office needs to both understand and still push enough to get the consolidations closed. These are just a few situations. Do share with us the situations you might have seen.
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