Welcome back -

Services for Organizations

Using our research, best practices and expertise, we help you understand how to optimize your business processes using applications, information and technology. We provide advisory, education, and assessment services to rapidly identify and prioritize areas for improvement and perform vendor selection

Consulting & Strategy Sessions

Ventana On Demand

    Services for Investment Firms

    We provide guidance using our market research and expertise to significantly improve your marketing, sales and product efforts. We offer a portfolio of advisory, research, thought leadership and digital education services to help optimize market strategy, planning and execution.

    Consulting & Strategy Sessions

    Ventana On Demand

      Services for Technology Vendors

      We provide guidance using our market research and expertise to significantly improve your marketing, sales and product efforts. We offer a portfolio of advisory, research, thought leadership and digital education services to help optimize market strategy, planning and execution.

      Analyst Relations

      Demand Generation

      Product Marketing

      Market Coverage

      Request a Briefing

        Robert Kugel's Analyst Perspectives

        << Back to Blog Index

        Not Your Grandpa’s Consolidate and Close Software

        The six costliest words in managing a finance department are, “we’ve always done it this way.” Closing the books is the process of finalizing and summarizing the financial activities of a business for a specific accounting period (typically a month, quarter, or fiscal year). It involves completing various tasks to ensure that all revenue, expense, and other financial transactions are properly recorded, accounts are balanced, and financial statements are prepared. Accounting processes are eternal, but how they are performed, using which tools, must constantly evolve to address the opportunities and constraints of the time. Since lockdowns disrupted departments in 2020, and now faced with a shortage of accountants, executives have focused on using technology to enhance the productivity (not just the efficiency) of their staff. In particular, they are looking at the systems they use to manage their financial consolidation to transform easily automated processes such as reconciliations and streamline the management of the close-to-report with workflows.

        Financial consolidation is the process of combining the financial statements of multiple entities within an organization to present the financial performance and position of theVentana_Research_2023_Assertion_CCR_Close_Mgmt_Software_20_S (1) entire group as a single economic entity. Dedicated software to manage the consolidation process has been around since the 1980s, but until recently there was very little new and therefore very little to comment on. However, the pandemic lockdowns forced finance and accounting executives to focus on ensuring the resiliency of their department. Moreover, the substantial number of experienced accountants that retired in the 2020-2022 period has increased the need to use technology to enhance staff productivity. In turn, this shortage is causing executives to take a fresh look at software that manages the full close-consolidate-report cycle end-to-end. One important objective is to manage this portion of the accounting calendar as a controlled, repeatable process. Ventana Research asserts that by 2026, one-half of midsize and larger organizations will use close management software to speed their close and achieve greater control of the process.

        When dedicated consolidation application software first appeared, it offered a breakthrough for finance organizations that needed to combine accounting information from multiple computer-based general ledgers. This is because it operated on personal computers, enabling staff autonomy from the IT department. Once the data feeds from individual source systems were configured, the accounting staff were able to produce financial statements on their own. Prior to the development of consolidation software, departments typically would use paper spreadsheets in conjunction with electronic calculators and adding machines to manually perform this oftentimes complex process.

        Although consolidation software has been around for decades, its adoption rate is relatively low and hasn’t changed much over the past decade. Our Office of Finance Research finds that 40% of midsize and larger organizations use a dedicated application, while the rest use a combination of the functionality in their ERP system and spreadsheets to handle consolidations. Behind this limited adoption is the fact that after undergoing considerable evolution in its first decade, there have been limited enhancements, mainly because consolidation processes are largely static. This has blunted market penetration and led to an extended replacement cycle: Based on our research, we estimate that the average age of a consolidation system is 7.1 years and that 78% of systems are still in use 12 years after implementation. Increased adoption of software to manage the close-consolidate-report cycle will take place over the next five years with the availability of a broader set of functionalities that enable more effective management of the process.

        The financial consolidation process itself involves eliminating intercompany transactions and balances to avoid double-counting, thus only reflecting transactions and balances with third parties. This provides a comprehensive view of the organization’s financial performance, and it facilitates more accurate analysis, enables objective decision-making, and presents a clearer picture of its performance and economic health. Consolidation is necessary when an organization has multiple legal entities, subsidiaries, joint ventures, or other forms of ownership or control of operating units. The consolidation process and its methods are tightly prescribed by financial accounting authorities and can be quite complex. Even the methods of adding up and rounding amounts in presenting the financial statements are tightly defined and can appear counterintuitive.

        Currency translation illustrates how complex rules can be. Organizations operating in countries with different currencies need to translate the results from the local currency, where a transaction takes place, to the headquarters’ unit of account. Depending on the nature of the account, accounting treatment and prevailing, generally accepted accounting principles, this exchange rate might be the spot rate at the close of business on a particular day or an average or median rate over a defined period. These calculations are tedious to perform manually and error prone, requiring considerable effort to ensure accuracy. Complexity multiplies when there are partnerships, partial ownership of entities, joint ventures and cross holdings. For companies with significant multinational operations, some may have subsidiaries that themselves must consolidate the accounts of multiple entities in a different currency, using different accounting standards.

        Dedicated consolidation 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. To smooth the process and ensure resiliency, systems now offer more effective collaboration features including secure data sharing as well as centralized document storage for working papers and supporting evidence. For enterprises that have 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 close. There has been generalSmart_Close_DI_202204_02_Quarter_Close (2) (1)-png agreement that organizations should complete their accounting close within a business week. However, our Smart Close Dynamic Insights finds that only 40% of organizations can close within six business days, so there is latent demand to find ways to speed up the process. Workflow automation is especially useful in handling the close-consolidate-report cycle, especially in being able to manage the process in a hybrid working environment, not just in 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.

        Today’s technology can help finance and accounting executives make their department 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 the use of artificial intelligence (AI) and even generative AI will make dedicated consolidation software an even more compelling choice, especially in a time of growing complexity in accounting standards and tax laws. Cloud-based systems, unlike the older on-premises kind, will incorporate these automatically as they are proven to be practical without requiring a major reimplementation or disruption to existing processes. I recommend that organizations that are not using a dedicated consolidation application or other software that can streamline or automate close-related tasks (such as reconciliations) should investigate whether their current technology is holding them back. Grandpa didn’t face the same challenges that are common today, and many practices and compromises that were fine back in the day are ripe for change.


        Robert Kugel


        Robert Kugel
        Executive Director, Business Research

        Robert Kugel leads business software research for Ventana Research, now part of ISG. His team covers technology and applications spanning front- and back-office enterprise functions, and he personally runs the Office of Finance area of expertise. Rob is a CFA charter holder and a published author and thought leader on integrated business planning (IBP).


        Our Analyst Perspective Policy

        • Ventana Research’s Analyst Perspectives are fact-based analysis and guidance on business, industry and technology vendor trends. Each Analyst Perspective presents the view of the analyst who is an established subject matter expert on new developments, business and technology trends, findings from our research, or best practice insights.

          Each is prepared and reviewed in accordance with Ventana Research’s strict standards for accuracy and objectivity and reviewed to ensure it delivers reliable and actionable insights. It is reviewed and edited by research management and is approved by the Chief Research Officer; no individual or organization outside of Ventana Research reviews any Analyst Perspective before it is published. If you have any issue with an Analyst Perspective, please email them to ChiefResearchOfficer@ventanaresearch.com

        View Policy

        Subscribe to Email Updates

        Posts by Month

        see all

        Posts by Topic

        see all

        Analyst Perspectives Archive

        See All