This article will explore options for you to find the best financial reporting and consolidations tool to enhance Microsoft Dynamics AX in your favor, including key features and functions of the leading modern tools.
Plenty of Microsoft Dynamics AX customers are managing the financials for multiple subsidiaries of a parent company. Consolidating transactional and operational information from more than one business, occasionally with multiple currencies, can be a logistics nightmare without a modern financial reporting and consolidations solution. As the size and value of data continues to grow, corporate decision-makers are not able to ignore the need for a tool that can help them aggregate data into one cohesive set of financial statements. If you are someone who relies on Dynamics AX, this will be an important article for you to understand your options for business user friendly, yet powerful consolidation solutions.
A definition first: financial consolidations is a term that refers to the combination of company financials from disparate subsidiaries into a singular, comprehensive set of financial reports. These statements consolidate data in ways that make sense of different currencies, any eliminations for transactional exchanges between subsidiaries, and any other adjustments, manual or with the help of today’s powerful BI solutions, to get an understanding of the parent company’s overall health. There are other motivating factors that are driving executives to shop around for a tool that streamlines financial consolidations.
A CFO could be seeking a modern, automated consolidation solution for plenty of reasons. One might be wanting to get away from older software that is too complex, like Cognos/TM1 or Hyperion, which require the IT department or a technical product expert to manage the product. Another executive might want to avoid software that is too simple for modern business demands, like Excel or FRx/Management Reporter.
Recently, I had the opportunity to speak with an executive, who depends on Dynamics AX and a third party financial consolidations tool to manage multiple subsidiaries around the world. In this role, she regularly tackles regulations specific to individual countries and currency conversions, with International Financial Reporting Standards to Generally Accepted Accounting Principles (IFRS TO GAAP) adjustments as an example, thanks to the flexibility and power of her consolidations solution. And there are reporting and consolidation tools that go beyond the General Ledger – and are positioned within a comprehensive, fully integrated Business Intelligence (BI) suite of solutions, like dashboards, budgeting, forecasting, modeling, ad-hoc reporting, and data warehousing. This article will zoom in on financial consolidations for your Dynamics AX experience, including how to pick out the best solution for you and your team.
Firstly, you have the option to run live directly from Dynamics AX for real-time analysis and/or pull from an online analytical processing (OLAP) cube or a data warehouse for consolidations. If you have fewer subsidiaries to aggregate and reconcile, with easier or no conversion of currency required, or if you do not expect to slow down the AX server because of bigger or multiple, simultaneous data queries, then live consolidations from the AX database will provide you real-time analysis. If you are not planning to pull data from additional sources, don’t have eliminations to enter or adjustments beyond what AX offers, you would probably benefit from just using Dynamics. However, several BI data stores host consolidations, so you might feel like your team could benefit more from implementing a data store that loads GL information from AX.
Replicating company data to an OLAP cube or a data warehouse is a simple manual push or a push you can schedule because of a routine. Usually via Microsoft SQL Server Integration Services (SSIS), data duplicates from Dynamics AX to a data store, and financial consolidations are completed at a higher performance level because of the simplified and optimized structure a data store provides compared to a complex ERP database like AX. If you consistently have more advanced currency conversions, are nervous about AX server sluggishness, or are dealing with a large amount of data to consolidate, you are likely going to need some type of data store. You also need to think about which consolidation tool features and functions are going to best serve you.
First up: intercompany eliminations. At times, one subsidiary will buy or sell goods to another subsidiary company, which cancels out the line items, in regard to expense or revenue for either company. Intercompany eliminations do exactly what they sound like – eliminate the transaction, so they do not show up on P&L and/or a balance sheet as a falsehood, but rather an inter-company resource reallocation, which you can perform within Dynamics AX or a BI data store. Some BI tools even offer fully configurable Excel forms that can be used to manually (and easily) input eliminations and adjustments.
You should also consider key functionalities, like currency conversions and consolidation adjustments. Similar to intercompany eliminations, currency conversions are just what they sound like: multi-national parent companies can consolidate their transactional data into a unified report with one currency. As for consolidation adjustments, whether you are correcting subsidiary information, making an adjustment to a consolidation, or completing the required IFRS to GAAP adjustments to comply with domestic and global accounting laws, there are modern tools that are specifically built to assist you in performing these processes, depending on how you submit statutory reports. And there’s more.
Reconciliation, allocations, and modeling organizational changes are additional aspects of financial consolidations for your consideration. If you use a data store, lots of corporations like to have either the subsidiary or the parent company staff reconcile the input data to make sure that every detail is correct, which can be performed within Dynamics AX, the BI front-end tool, or in the data store. Some organizations allocate expenses or revenue sources to a department, a division, and/or a particular subsidiary. You can do these allocations in AX, during the replication process, or sometimes, you can create allocation reports of varying complexities within a data store. Finally, if you want to see the effects of acquisitions, internal reorganization, or divestitures, some data stores allow you to do some modeling of potential roll-ups by copying and altering an infinite number of company trees or hierarchies. Using this feature, you can forecast how specific changes could affect the subsidiary portfolio.
Financial consolidations can be tedious and sometimes intense, so the long list of features and functionalities to consider makes sense if you want to make the best investment for your team’s specific goals. Solver, Inc. is happy to answer questions and generally review BI360’s easy-to-use, Excel-powered consolidation tool for Microsoft Dynamics AX with both real-time or data warehouse integrated analysis, comprehensive reporting and collaboration as a way to accelerate company performance management.