The power of consolidated financial statements

In the dynamic landscape of modern business, where companies often operate as interconnected entities within a group structure, understanding the overall financial health becomes a strategic necessity. Consolidated financial statements play a pivotal role in this regard, offering a comprehensive view that goes beyond individual company snapshots. 

Demystifying consolidated financial statements

Consolidated financial statements are financial reports that combine the financial results of a parent company and its subsidiaries, into a single set of financial statements. This includes consolidated income statement, balance sheet and cash flow statements The purpose of preparing consolidated financial statements is to provide a comprehensive view of the financial performance and financial position of a group of companies as if they were a single entity.

This serves a dual function: offering insights into the collective performance of the group and enhancing transparency for stakeholders. When companies operate under a parent company-subsidiary relationship, stakeholders, including investors and regulatory bodies, seek a consolidated view to assess the overall health and stability of the group.

Manual consolidation 

Traditionally, creating consolidated financial statements involves a meticulous dance with spreadsheets. Finance teams can spend hours navigating through endless worksheets, gathering and consolidating financial reports from each subsidiary, adjusting for intercompany transactions, and ensuring compliance with accounting standards. The process is not only time-consuming but also susceptible to errors, as the complexity of spreadsheets often leads to miscalculations and inconsistencies. 

Challenges with manual consolidation: 

• Error-Prone: Manual consolidation is susceptible to errors, leading to inaccuracies in financial reporting. 
• Time-Consuming: The sheer volume of data and intricacies involved make manual consolidation a time-intensive process. 
• Lack of Agility: In a fast-paced business environment, the manual approach lacks the agility needed for prompt decision-making. 

Automated consolidation

In the era of digital transformation, innovative solutions like Phocas Financial Statements software are reshaping traditional processes. Phocas frees finance teams from the tedious task of manually importing and reconciling data by automating the process of financial consolidation, ensuring accuracy and efficiency.  

Direct integration: One of the standout features of Phocas is its ability to directly integrate with ERPs like Epicor, Infor, Sage, SAP and Netsuite, as well as other business systems. This facilitates the smooth flow of data from subsidiaries to the central database, streamlining the consolidation process. 

User Empowerment: Phocas not only simplifies complex data consolidation and analysis but also places a strong emphasis on user empowerment. The tools provided by Phocas are designed to be human-friendly to ensure everyone has access to the same set of numbers. Decision-makers, regardless of their technical background, can freely explore consolidated financial statements to facilitate data-driven decision-making.

"Automating our financial statements was a major step for our company and is saving time and resources. Executives now have access to dashboards that give them a snapshot of what is happening with the business, including one-day, month-to-date, year-to-date sales; gross profit percentages; and average sales per invoice, among other data points." 

Dennis Karpinski, Director of E-commerce and Business Analysis - Eastern Industrial Supplies 

Making complexity simple

By automating the consolidation process, human error is significantly reduced. With its business intelligence foundation, Phocas ensures that financial data is not just consolidated but also validated, providing stakeholders with a reliable data foundation for decision-making.

Time saved through automation is invaluable. Finance teams can redirect their efforts from manual consolidation to more strategic tasks. The fluid readability of Phocas ensures that users can quickly grasp insights, enabling them to focus on interpreting data rather than wrestling with spreadsheets.

Phocas’ ability to cut through complexity enables fast access to up-to-date insights. This empowers users to be agile in their decision-making, allowing them to respond quickly to rapidly changing market dynamics.  

Multi-currency  

In the ever-expanding global marketplace, Phocas goes beyond traditional financial consolidation by introducing multi-currency functionality. This provides benefits such as the ability to compare a subsidiary's results in both their local and reporting currencies. This side-by-side analysis of reporting currency and local currency highlights the impact exchange rates can have on the group's consolidated overall performance. Something that is often outside the control of the subsidiary. 

Phocas ensures that financial reporting reflects the global landscape accurately. Profit and loss and specified balance sheet accounts such as equity are converted into reporting currency at the transaction rate or average rate. Other balance sheet accounts are converted based at the period end spot rate. Phocas automatically calculates the foreign currency gain or loss on consolidation reserve account.  

This meticulous approach to local currency conversion provides users with a holistic view of their global financial standing. Phocas not only provides the functionality but also ensures that users understand and account for these nuances in financial reporting.

A consolidated future with Phocas

In today’s business landscape, data is abundant, but insights are paramount. Consolidated financial statements are not just a regulatory requirement; they are a compass for strategic decision-making. Phocas Financial Statements anchored by its Analytics (BI) foundation, is at the forefront of simplifying this intricate process. By automating financial consolidation, Phocas not only enhances accuracy and saves time but also embodies the essence of user empowerment.