The annual budget is an essential business practice and needs to comply with some factors to be carried out to the best.
First of all, it has to be aligned and integrated with the organisation’s sales strategies and plans, as well as to be supported by a dedicated software.
Secondly, it is important to communicate the forecasts measuring KPIs, to automate the calculation of operational and financial data, to be fully integrated with the associated planning, forecasting and reporting exercises, and to reduce the time needed to complete the process.
A question that has plagued board rooms and senior leadership teams over the past few years.
In short, the answer is “yes” there is a difference, knowing which one to choose however means understanding how they differ and what your specific needs are.
Financial reporting cycles are under greater pressure than ever before. New compliance standards, increased transparency expectations and heightened traceability levels have all contributed towards a sizeable shift in the way in which organisations report performance information. As a result,
Corporate Performance Management (CPM) is now becoming widely embraced as it allows organisations to be more efficient monitoring and managing their performance.
‘Consolidation’ simply means the action or process of combining a number of things into a single more effective or coherent whole. However, to finance teams financial consolidation is a well- defined process that includes many complexities.
So what are the key steps in financial consolidation process
Collecting trial balance data (e.g., Assets, Liabilities, Equity, Revenue, and Expense accounts) from multiple systems, locations, contributors and mapping it to a centralised chart of accounts
Consolidating the data following specific accounting rules and guidelines, such as GAAP or International Financial Reporting Standards (IFRS)
Reporting results to internal and external stakeholders
Reports generated by the consolidation process include income statement, balance sheet and statement of cash flows.
It is not just about addition, it is about all the adjustments.
On the surface financial consolidation may present itself as a simple addition of numbers. However, it is more complex. Within financial consolidation specific adjustments need to be meet as the adjustments are being made from subsidiary level to parent company level, this includes the following.
Multi-currency conversion – in Europe alone there exist 11 different currencies over the 28 member nations
Intercompany transactions and balances eliminations
Adjusting journal entries – To reflect the correct position in the budget to which the expenses occurred
Accounting to reflect organisations that are not wholly owned by the parent company