Financial close and consolidation can be a time-consuming task, and the bigger and more complex your business becomes, the more attractive the idea of finding a software solution to make it easier becomes.
You’re likely already using at least a few different types of financial management tools in your business in addition to your accounting software or enterprise resource planning (ERP) systems. The key to streamlining financial close and consolidation lies in building a well-integrated tech stack with the right combination of features to smoothly handle each step in the process.
In this guide, you will find an in-depth discussion of the financial close process, the inherent challenges, and how technology can help you overcome them, benefitting your workflow. We’ll compare popular tools that handle different aspects of the financial close and consolidation process and provide vendor-specific insights to help you make informed decisions and align your tech investments with your business needs.
Table of Contents
What is financial close and consolidation?
The financial close is an accounting process that summarizes your business's financial performance over a defined reporting period, typically monthly. It involves reconciling accounts and adjusting entries in your accounting or ERP system to support financial reporting. Once all your books are in order, you can create the financial reports stakeholders need to understand the current financial health of your business.
Consolidation is part of the overall financial close and consolidation process, which is necessary to pull together the ledgers of all the different subsidiaries within the business for comprehensive, consolidated financial reporting.
The 4 main steps in the financial close and consolidation process
While most of the work associated with the process falls to the accounting team, the finance team also has a role. Let’s take a closer look now at what it takes to get this work done.
Step 1: Preparing a “soft close”
A "soft close" is an interim financial close that allows you to quickly review the financial data.
- Enter month-end numbers into ERP: The accounting team inputs all month-end financial data, such as sales, purchases, and payroll, into the ERP. It includes recording transactions, reconciling accounts, and ensuring that all financial activities for the month are documented.
- Conduct accounting reviews: Accountants perform initial reviews to verify the accuracy of the financial data entered into the ERP. They reconcile all accounts and check balances across bank accounts, accounts receivable, and accounts payable. It helps the accounting team record all transactions correctly and make preliminary adjustments as needed.
- Post accrual entries and reversals and adjust journal entries: Accrual entries record revenues and expenses incurred but not yet realized in cash. This is also when the accounting team records depreciation for the period, adding in that period’s amortized expenses. Other non-cash items, like provisions for bad debts or unrealized gains and losses, are also adjusted to reflect the company's true financial position.
- Determine key financial metrics: The accounting team performs the calculations necessary to provide an overview of business performance, such as earnings before interest, taxes, depreciation, and amortization (EBITDA), net income, cash flow, and balance sheet entries.
- Adjust for any errors: After entering all necessary data and performing initial reviews, the ERP system may still be updated or adjusted if you notice errors.
Step 2: Financial consolidation
In this step, the accounting and finance teams combine data from all the different subsidiaries or departments in the company to get a comprehensive view of the company’s financial health.
The accounting team typically handles most of the overall financial close process, with a focus on ensuring the accuracy and consistency of the financial records. When the accounting team does its consolidation, they work to reconcile subsidiary ledgers with the general ledger (GL) and eliminate intercompany transactions.
The finance team also conducts its own consolidation. While the accounting team focuses on accuracy and balancing the books, the finance team analyzes the business's performance. The review helps identify potential gaps or variances that need to be corrected before the final "hard close".
Step 3: Reporting for final review (the “hard close”)
The "hard close" ensures financial statements are accurate, complete, and compliant, preparing them for reporting. It involves finalizing the books, reviewing consolidated financials, and locking the numbers for external reporting, allowing no further adjustments.
At this stage, accounting shares a consolidated report with the finance team and the CFO for a high-level review before officially closing the books. This allows one last opportunity to make sure the overall numbers make sense and ensures that any potential errors or major issues are caught before the books are closed. For example, if the CFO notices any unexpected variances from the budget or plan, the finance and/or accounting teams might need to do additional analysis to explain them.
This review also gives the finance team an opportunity to look at the consolidated data from various angles and detail levels, enabling variance analysis, performance tracking against budgets, and trend-spotting. While initial consolidation focuses on balancing numbers, detailed reporting provides insights that inform decision-making.
Step 4: Official close and dissemination of financial reports
Once finalized, the accounting team securely archives all financial records, documents, and reports for future reference, audits, and compliance checks.
With the books closed, the focus shifts to sharing the information with all the stakeholders that need it. For both private and public companies, finalized financial reports are given to internal stakeholders, such as department heads and the executive team, to guide business decisions.
For publicly traded companies, reports are also submitted to relevant regulatory agencies such as the U.S. Securities and Exchange Commission (SEC) and shareholders. This not only ensures compliance but also the transparency shareholders need to understand the company’s financial performance.
Post-close and consolidation activities
The finance team uses the information provided in the financial close and consolidation in a variety of important FP&A activities, including:
- Variance analysis: Analyzing variances between actual results and budgets or forecasts helps to understand performance drivers. By identifying discrepancies and investigating their causes, the finance team can then recommend corrective actions or make strategic adjustments.
- Budgeting and forecasting: Effective budgeting and forecasting models rely on accurate historical financial data. Financial statements generated during the financial close and consolidation process provide finance team data and insights to build more accurate models for future financial performance.
- Strategic planning: Insights and recommendations from financial statements aid decision-making and long-term planning for senior management. The accounting team prepares these statements, while the finance team uses them for detailed financial analysis, planning, and strategy development.
5 key benefits of using an integrated tech stack for financial close
Spreadsheets lack the depth and flexibility needed for sophisticated financial close activities. Many software tools offer different features that, when integrated with your core accounting system or ERP, can help make your financial close more efficient, accurate, and secure. Technology offers the scalability and automation needed to tackle the financial complexities of SaaS companies. Here are just a few of the benefits you can enjoy with a well-integrated tech stack:
1. Data centralization and automation
Building a tech stack that connects your core accounting software or ERP, along with other source systems allows you to automate several aspects of your financial close. One of the biggest benefits here is the time you save in manually pulling all your data together. Automated data consolidation also improves the accuracy of your data by eliminating much of the potential for human error, and many tools available today also include validation rules and error checks to ensure data accuracy across all systems.
2. Support for complex consolidations
With a well-integrated tech stack, companies can more easily manage complex consolidations in multi-entity and multi-currency environments. Financial software simplifies processes such as intercompany eliminations and foreign exchange transactions, ensuring accurate and timely consolidations.
3. Streamlined workflow management and collaboration
Financial software simplifies the financial close process with tools for workflow automation, task management, and real-time collaboration. Streamlined data entry, validation, and consolidation, along with the ability to automate repetitive tasks like reconciliations and journal entries, significantly speeds up the financial close process. Workflow automations, such as automated approvals, also boost efficiency and remove bottlenecks for a faster close.
4. Customizable reporting and analytics
With a unified tech stack, accounting and finance teams have real-time access to all their financial data in one centralized location. With the ability to view up-to-date reports and metrics instantly and on-demand, teams can provide timely insights to stakeholders, often via customized, interactive dashboards. This helps companies stay ahead of financial trends, and empowers leaders to make data-driven decisions to boost performance.
5. Enhanced data security for compliance and audit readiness
SaaS companies must meet regulatory standards like GAAP and IFRS. Financial software protects sensitive financial data and enhances compliance. It provides features like audit trails, role-based access (RBA) controls, and data encryption. The improved security and compliance readiness reduces the risk of discrepancies and facilitates smoother audits, saving time and resources during reviews.
A market sector comparison of the top 6 financial close and consolidation software tools
| Software/ Platform | Drivetrain | Numeric | NetClose | Blackline | FloQast | Onestream |
|---|---|---|---|---|---|---|
| Type of solution | Comprehensive FP&A Platform | Financial close automation tool | Financial close automation tool (designed specifically for NetSuite) | Financial close and accounting automation tool | Financial close management software | Finance management software |
| Best for | SMB to Mid-Market | SMB to Mid-Market | SMB to Mid-Market | Enterprise | Mid-Market to Enterprise | Enterprise |
| Integrations with core accounting tools & ERPs | Native integrations for Sage, NetSuite, Quickbooks, Xero, SAP, and Zoho Books + custom integrations with all other tools | 4 integrations: Sage Intacct, NetSuite, Quickbooks, and Xero | 1 integration: NetSuite | 6 integrations: Sage Intacct, NetSuite, SAP, Oracle, Microsoft Dynamics, Acumatica | 5 integrations: Sage Intacct, NetSuite, Quickbooks, Xero, and Microsoft Dynamics | 4 integrations: NetSuite, SAP, OracleMicrosoft Dynamics |
| Integrations with CRM, HRIS, and other business applications | 200+ native integrations | Not supported | Not supported | Not supported | Not supported | < 15 native integrations |
| Automated reconciliation | ||||||
| Close checklist, calendar and dashboard | ||||||
| Compliance and controls integration | ||||||
| Comprehensive data consolidation | ||||||
| Variance analysis | ||||||
| Customized financial & business reporting | ||||||
| Flexible Planning & Forecasting | ||||||
| Implementation time | 4-6 weeks | 4-5 weeks | 2-3 months | 5-6 months | 1-2 months | 6-8 months |
| Ease-of-use |
Comprehensive FP&A platform
Small and mid-market
Drivetrain is a powerful FP&A software that streamlines the financial close and consolidation process, seamlessly gathering data from ERP, accounting systems, and other data sources. It automatically consolidates financial data from multiple entities or departments to eliminate manual data entry tasks.
Drivetrain updates financial reports such as income statements, balance sheets, and cash flow statements in real-time to provide an accurate view of the company's financial position. The variance analysis feature allows you to track budget vs. actuals and monitor variances across revenue, expenses, and headcount.
Drivetrain's intuitive interface and collaboration features make it easy for teams to work together on the financial close process. It’s also very easy to use, with an intuitive UI/UX, and natural language formulas that use Excel syntax. You can easily assign tasks, track progress, and ensure everyone works from a single source of truth.
Comprehensive data consolidation capabilities via integration with any ERP or accounting software.
200+ native integrations with other types of business systems such as CRM, HRIS, and Billing to make data needed for reconciliation easier to obtain.
Robust variance analysis capabilities, including detailed month-over-month (MoM) plan vs. budget analysis.
Full-featured FP&A platform providing many other value-added features for finance teams.
Completely customizable financial and business reporting.
Transform your financial consolidation & reporting with a robust FP&A platform
Financial close automation tool
Small and mid-market
Numeric is a close management solution that streamlines the closing process by automating reconciliations. It provides a unified view of financial data, which helps stakeholders involved in the review process understand variances and identify key drivers behind financial performance. Users find it very easy to use and can pull flexible reports tailored to their needs to make review easier and to improve the overall efficiency of the reporting process.
Automated journal entries for seamless automation of recurring journal entries.
Real-time close tracking allows teams to monitor the progress of the close process.
Variance analysis capabilities available but limited to MoM variance analysis and quarter over quarter (QoQ) flux analysis.
Financial close automation tool
Small and mid-market
Netgain’s NetClose is a solution developed specifically for NetSuite to automate the financial close process. By reducing reliance on manual processes and spreadsheets NetClose speeds up the closing process giving accounting teams more time to do their reviews.
NetClose centralizes all financial data into one location to ensure that journal entries are automatically posted to the GL. It simplifies reconciliation by making all the data readily available for review. With customizable checklists and a Kanban-style task system, NetClose helps to organize the month-end close process, allowing teams to assign tasks, track progress, and identify bottlenecks. However, based on G2 reviews, users may find it slightly more difficult to learn as compared to Numeric.
Advanced task management capabilities that help teams organize, assign, and track close-related activities.
Close calendar to help you manage deadlines, coordinate tasks, and ensure that all steps in the close process are completed on time.
Variance analysis capabilities available but limited to MoM variance analysis and quarter over quarter (QoQ) flux analysis
Financial close and accounting automation tool
Enterprise
BlackLine enhances the financial close and consolidation process by automating the process of reconciling multiple ledgers. By replacing manual, spreadsheet-driven reconciliations with automated workflows, Blackline helps to reduce the time spent validating consolidation data.
BlackLine also provides real-time dashboards and reporting capabilities. It speeds up the close process and reduces compliance risks by centralizing financial data and automatically tracking late adjustments and journal entries.
Note that based on G2 reviews, Blackline has a steep learning curve and the UI is not very intuitive.
Automated account reconciliation ensures that accounts are balanced correctly.
Journal entry management with strong controls and audit trails to maintain compliance.
Advanced task management and workflow automation provides real-time visibility into task status and deadlines.
Financial close management software
Mid-market to enterprise
FloQast is close management software that streamlines the review and reconciliation of financial statements at the end of each accounting period. It offers reporting and accounting tools designed to help accounting and finance teams close their books faster.
Based on G2 reviews, users seem to enjoy Floqast’s UI/UX. FloQast also allows accounting teams to collaborate with stakeholders directly within the platform eliminating back-and-forth over emails.
FloQast also centralizes all documentation for the financial close and organizes it for audit purposes.
Centralized close management dashboard highlights tasks, risks, and completion rates.
Checklist automation to help teams stay organized and on track with each step of the close process.
Can consolidate data from five different accounting tools/ERPs, including Sage Intacct, NetSuite, Quickbooks, Xero, and Microsoft Dynamics.
Financial management software
Large enterprises
OneStream integrates with ERP systems and other data sources to automatically consolidate financial data from multiple subsidiaries and departments. OneStream's Transaction Matching solution collects large volumes of data from various sources, matching them to their transactions in the GL. It uses configurable, rules-driven methods for automatic matching to speed up the close process.
OneStream automatically handles complex shareholding relationships, intercompany eliminations, and currency translations. It also supports regulatory financial reporting requirements and generates financial reports in real time.
Some users have noted that OneStream’s UI can be challenging to use with a steep learning curve that requires extensive training to become a power user.
Robust variance analysis capabilities, including detailed MoM plan vs. budget analysis.
Can consolidate data from four accounting tools/ERPs including NetSuite, SAP, Oracle, and Microsoft Dynamics as well as other business applications.
Completely customizable financial and business reporting.
Add the power of Drivetrain to your integrated tech stack
One of the most difficult aspects of financial close is in the consolidation process. Here are the four biggest challenges that companies struggle with (and what prompts many to start looking for a good solution):
- Consolidating across multiple different ERPs: When a company uses multiple ERP systems, consolidating financial data becomes complex. Each ERP may have different data structures, accounting practices, and reporting formats, making it hard to standardize and aggregate financial information. Integrating and reconciling data from various systems requires specialized tools or processes to ensure consolidated financial statements are complete and accurate.
- Consolidating across multiple instances of the same ERP: Even when a company uses the same ERP in all of its subsidiaries, consolidating data from each subsidiary’s version of the ERP can be challenging. Customizations may cause discrepancies in data classification, accounting rules, or reporting standards. Consolidation needs careful data mapping to ensure accuracy and eliminate discrepancies.
- Accurately accounting for the effects of foreign exchange (FX) rates: For companies operating in multiple countries with different currencies, managing FX gains and losses adds complexity. Foreign subsidiaries may report in their local currency, but the parent company converts these into a single reporting currency. It requires updating exchange rates, recording currency fluctuation gains or losses, and ensuring accurate financial transactions in local and reporting currencies.
- Making cumulative translation adjustments (CTA): In FX accounting, a cumulative translation adjustment (CTA) includes unrealized gains or losses from currency fluctuations. Recorded as a separate line on the balance sheet, it can significantly impact a company's financial position. The CTA may rise or fall as exchange rates change, affecting asset and liability values.
Ideally, any new investment you make in your stack will address multiple needs while providing additional, value-adding capabilities. And of course, whatever software you’re adding needs to play well with all the other tools you’re using in your financial close and consolidation process.
Drivetrain checks all of these boxes with several features that support financial close and consolidation and additional tools that will also help you streamline all of your core FP&A processes.
As part of your integrated tech stack, Drivetrain can:
- Integrate with your existing ERP or accounting system, along with all the other source systems that contain information you need for financial close and consolidation as well as for financial planning and analysis.
- Automate data consolidation from multiple entities, departments, or subsidiaries into a single platform to speed up your financial close.
- Simplify even the most complex consolidation, including the management of intercompany eliminations and foreign exchange (FX) accounting easy.
Drivetrain delivers a comprehensive solution for managing the entire financial close and consolidation process. Sign up for a demo today.
Power 3x faster financial close and consolidation with Drivetrain
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