5 ways to minimise human error in accounting consolidation for company groups

Writen by Stefan Farrugia • 13th November 2017 < back

1. Focusing on Adjusting Statements for Distortions
This is one of the most common problems in financial statement analysis and inter-company reconciliations. One-time items such as write-offs, sales of divisions, accounting revisions etc., are not always adjusted. However, they are important for the accuracy of the reporting and decision-making.

If you suspect your analyst may be cutting corners it’s usually easy to spot in your reports. If you see a write-off which is a round number like 5000 or 5500, you can almost be sure that the amount is a rounded estimate, not an actual figure. You can, therefore, expect future corrections.

2. Clearly defined financial consolidation roles to facilitate reconciliations
The HR aspect is always key. Roles and responsibilities as well as hiring the right people for the job can make or break your reporting process. Accountability and responsibility for financial reporting functions need to be clearly defined, assigned and assessed. As an extension, a basis of financial literacy should be instilled in every employee across the whole organisation during the induction process; it’s not just for the financial team.

3. Automation of inter-company consolidation process
Wherever possible, the processes should be automated both at group and company level. Reports should be run periodically and get cross-checked for accuracy. This should reduce errors and speed up the process.

4. Well documented and enforced inter-company policies and procedures
Putting these in place will reduce issues of non-compliance and help to execute complex transactions. Internal reporting rules, policies, and procedures should be made easily accessible through an intranet or other collaborative environments.

5. Pre-close reconciliations and adjustments
These should be performed consistently in a pre-agreed manner. Ideally, a Close Manager should be appointed. This person should be in charge of approaching the monthly reporting with a “project” mentality, organising meetings and planning each close. Project management software could be used to identify problems and address them on an ongoing basis.