Robert Kugel's Analyst Perspectives

I am happy to share insights gleaned from our latest Buyers Guide, an assessment of how well software providers’ offerings meet buyers’ requirements. The Financial Consolidation and Close: ISG and Ventana Research Buyers Guide is the distillation of a year of market and product research by ISG and Ventana Research. The financial records of an enterprise must be periodically reviewed and summarized to create financial statements that inform executives and interested third parties of the organization’s financial condition and performance. A consolidation of the financial records and other departmental close processes involves an intricate set of repeated processes that must be performed in a prescribed order and fashion. Enterprise software enables finance and accounting departments to be more productive throughout the close by automating calculations, coordinating the execution of processes and facilitating communication among participants. The desire to make the department more productive and resilient has led to increased investment in technology to assist in performing the full consolidate and close cycle. The desire to make the department more productive and resilient has led to increased investment in technology to assist in performing the full consolidate and close cycle. This guide examines software that manage the financial consolidation process as well as assists in managing other accounting close processes. ISG Research defines consolidation software as an application that manages the financial consolidation process in conformance with accounting standards for enterprises with complex requirements. All accounting or ERP systems will perform a statutory consolidation of the accounts handled in that system using the generally accepted accounting principles of that parent company. But this approach is inadequate for enterprises that, for example, have accounting systems from multiple providers or other complicating factors that necessitate a separate system. We define close management software as applications that support the timely and efficient completion of close cycle tasks, especially automating reconciliations and performing process management functions. Consolidation is necessary when an organization has multiple legal entities, subsidiaries, joint ventures or other forms of ownership or control of operating units. The financial consolidation process involves eliminating intercompany transactions and balances to provide a comprehensive and accurate view of the organization’s financial condition and performance. The consolidation process and its methods are tightly prescribed by financial accounting authorities and can be quite complex. However, consolidation is only part of the financial or accounting close, which is the process of finalizing a company's financial statements at the end of an accounting period, such as a month, quarter or year. During the financial close, all financial transactions are reconciled, reviewed and adjusted as needed to prepare the financial statements. These include the balance sheet, income statement, cash flow statement and the statement of shareholders’ equity. This process is essential for ensuring the accuracy and completeness of financial reporting, and it is often a critical step in meeting regulatory requirements and providing stakeholders with a clear picture of the company's financial performance. In all but the smallest enterprises, consolidation and close processes require coordination and collaboration. Software assists in ensuring that steps in the processes are handled completely and correctly, collaboration is assisted by direct communications, documents and notations by participants are easily accessed and necessary reviews and sign-offs are performed. Those managing the process are assisted in being able to monitor progress and provide alerts when issues arise. Consolidation and close management software has improved, incorporating real-time integration with source systems. This is important because of the myriad last-minute adjustments and corrections that take place during the consolidation process. Systems now offer more effective collaboration features to smooth the process and ensure resiliency, including secure data sharing as well as centralized document storage for working papers and supporting evidence. For enterprises with especially complex structures and reporting requirements, the ability to consolidate using multiple accounting standards at different levels and branches of the corporate hierarchy can be useful. Another factor driving the adoption of dedicated software is the desire to shorten the accounting close. The accounting or financial close is the process of finalizing a company's financial statements at the end of an accounting period, such as a month, quarter or year. During the financial close, all financial transactions are reviewed and adjusted, and the financial statements are prepared, including the balance sheet, income statement, cash flow statement and the statement of shareholders’ equity. This process is important for ensuring the accuracy and completeness of financial reporting, and it is often a critical step in meeting regulatory requirements and providing stakeholders with a clear picture of the company's financial performance. ISG-Ventana Research asserts that by 2027, one-half of midsize and larger enterprises will use close management software to speed the close and achieve greater control of the process. There has been agreement that organizations should complete the accounting close within a business week. Workflow automation is especially useful in handling the close-consolidate-report cycle, specifically to manage the process in a hybrid working environment and for organizations that span the globe. As with any workflow-enabled process, administrators spend far less time ensuring individuals have started or completed their tasks, hand-offs are smoother and, where reviews and approvals are required, these events are recorded and easily accessed by external and internal auditors and support assertions by executives that internal controls and procedures have been followed. In accounting, the term reconciliations refers to any process that compares two sets of records to ensure their accuracy and consistency—an inherent component of the double-entry framework. This typically involves comparing financial transactions or balances from different sources, such as bank statements versus accounting records or intercompany transactions between different subsidiaries of a company. The main objective is to ensure that the books balance by identifying and resolving discrepancies between two sets of records, ensuring that the accounting data is accurate. Automating reconciliations, especially intercompany transactions, makes the staff more productive and makes the department a more attractive place to work. Workflow-enabled systems also contribute to a smoother close because consolidating and closing the books should be almost exactly the same from one period to the next, including processes for handling exceptions and unexpected events and managing the close calendar. With workflow, the controller and chief accounting officer can spend less time on administration while having greater situational awareness and control. It’s likely that advances provided by artificial intelligence (AI) and even generative AI (GenAI) will make dedicated consolidation and close software an even more compelling choice. Today’s technology can help finance and accounting executives make their departments more productive in ways that improve the working environment and make it possible for them to attract and retain the best talent in a resource-constrained environment. It’s likely that advances provided by artificial intelligence (AI) and even generative AI (GenAI) will make dedicated consolidation and close software an even more compelling choice, especially in a time of growing complexity in accounting standards and tax laws. While accounting relies on doing the same things consistently, how they are done is always evolving because of legal and regulatory changes as well as the constant change in how accounting principles are reflected in processes. A continuous improvement mindset is necessary to have the adaptability and resilience to remain productive. Software designed to assist in managing the accounting close is a necessary tool for financial executives. This research-based index evaluates the full business and information technology value of financial consolidation and close software offerings. I encourage you to learn more about our Buyers Guide and its effectiveness as a provider selection and RFI/RFP tool. We urge organizations to do a thorough job of evaluating financial consolidation and close offerings in this Buyers Guide as both the results of our in-depth analysis of these software providers and as an evaluation methodology. The Buyers Guide can be used to evaluate existing suppliers, plus provides evaluation criteria for new projects. Using it can shorten the cycle time for an RFP and the definition of an RFI. The Financial Consolidation and Close Buyers Guide evaluates the following software providers that offer products to address key elements of financial consolidation and close management as we define it: Board, Fluence Technologies, Oracle, Prophix, SAP, Vena Solutions and Wolters Kluwer. The Buyers Guide for Financial Consolidation and Close in 2024 finds Oracle first on the list, followed by SAP and Board. Software providers that rated in the top three of any category ﹘ including the product and customer experience dimensions ﹘ earn the designation of Leader. The Leaders in Product Experience are: Oracle SAP Board The Leaders in Customer Experience are: Oracle Board Vena Solutions. The Leaders across any of the seven categories are: Board, which has achieved this rating in seven of the seven categories. Oracle in six categories. SAP in five categories. Vena Solutions in three categories. The Financial Consolidation Buyers Guide evaluates the following software providers that offer products to address key elements of financial consolidation as we define it: Board, Fluence Technologies, Jedox, IBM, insightsoftware, Infor, OneStream, Oracle, Planful, Prophix Software, SAP, Talentia Software, Vena Solutions, Wolters Kluwer, LucaNet and Workday. The Buyers Guide for Financial Consolidation in 2024 finds Oracle first on the list, followed by OneStream and SAP. Software providers that rated in the top three of any category ﹘ including the product and customer experience dimensions ﹘ earn the designation of Leader. The Leaders in Product Experience are: Oracle SAP OneStream The Leaders in Customer Experience are: OneStream Oracle Board The Leaders across any of the seven categories are: OneStream and Oracle, which has achieved this rating in six of the seven categories. SAP in five categories. Board in two categories. Planful and Vena Solutions in one category. The Financial Close Buyers Guide evaluates the following software providers that offer products to address key elements of close management as we define it: Blackline, Board International, FloQast, Fluence, NetSuite, Oracle, SAP, Trintech Adra, Trintech Cadency, Vena Solutions and Wolters Kluwer The Buyers Guide for Financial Close in 2024 finds Oracle first on the list, followed by Blackline and SAP. Software providers that rated in the top three of any category ﹘ including the product and customer experience dimensions ﹘ earn the designation of Leader. The Leaders in Product Experience are: Oracle SAP Blackline The Leaders in Customer Experience are: Blackline FloQast Oracle The Leaders across any of the seven categories are: Oracle, which has achieved this rating in six of the seven categories. Blackline and SAP in four categories. Board in three categories. FloQast in two categories. NetSuite and Vena Solutions in one category. The overall performance chart provides a visual representation of how providers rate across product and customer experience. Software providers with products scoring higher in a weighted rating of the five product experience categories place farther to the right. The combination of ratings for the two customer experience categories determines their placement on the vertical axis. As a result, providers that place closer to the upper-right are “exemplary” and rated higher than those closer to the lower-left and identified as providers of “merit.” Software providers that excelled at customer experience over product experience have an “assurance” rating, and those excelling instead in product experience have an “innovative” rating. Note that close provider scores should not be taken to imply that the packages evaluated are functionally identical or equally well-suited for use by every enterprise or process. Although there is a high degree of commonality in how organizations handle financial consolidation and close, there are many idiosyncrasies and differences that can make one provider’s offering a better fit than another. Our firm has made every effort to encompass in this Buyers Guide the overall product and customer experience from our financial consolidation and close blueprint, which we believe reflects what a well-crafted RFP should contain. Even so, there may be additional areas that affect which software provider and products best fit an enterprise’s particular requirements. Therefore, while this research is complete as it stands, utilizing it in your own organizational context is critical to ensure that products deliver the highest level of support for your projects. You can find more details on our community as well as on our expertise in the research for these Buyers Guides: Financial Consolidation and Close Financial Consolidation Financial Close Regards, Robert Kugel

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