Financial consolidation is an essential practice for businesses looking to understand their overall performance. By combining financial data from different entities within a single entity, it provides a consolidated and coherent view of the company's financial health as a whole. In this article, we will explore the benefits of financial consolidation for a comprehensive view of your company's performance.
Get an overview of the performance
Financial consolidation allows for the merging of financial data from all the entities of a company into a single financial statement. This provides an overview of the company's overall performance, revenues, expenses, and cash flows. Such a comprehensive view is essential for making informed decisions and aligning the various entities with the company's strategic objectives. Thus, a company with multiple subsidiaries in different countries can use financial consolidation to get an accurate picture of its overall performance, despite the diversity of its operations and information systems.
Optimize risk management
Financial consolidation also allows for the identification and more effective management of risks. By pooling data from all entities, it becomes easier to detect trends, anomalies, and areas of risk. This enables the implementation of appropriate control and mitigation measures to reduce the company's overall risk exposure.
Improve decision-making
With a comprehensive view of performance and improved risk management, financial consolidation enables better decision-making. Executives have access to more accurate and reliable information to assess the company's situation, identify opportunities and threats, and define appropriate strategies. This results in better resource allocation, greater agility in response to market changes, and improved financial performance.
A company in the phase of external growth can use financial consolidation to assess the potential impact of an acquisition on its overall performance and make an informed decision.
Financial consolidation is an essential tool for businesses that want to have a comprehensive view of their performance and manage their activities more effectively. By bringing together the financial data from all entities, it provides an accurate picture of the situation, optimizes risk management, and improves decision-making. With the right tools and best practices, financial consolidation can become a real performance lever for companies of all sizes.