Beyond the Close: How Financial Consolidation Creates Strategic Advantage

[00:00:14] Melissa Howatson Welcome to The CFO Show. I'm your host, Melissa Howatson, CFO at Vena. In today's episode, we're diving into one of the most critical yet often overlooked parts of the finance function, financial consolidation. As organizations grow and data becomes more complex, consolidation is no longer just about closing the books. It's about creating a single source of truth that drives strategy, strengthens collaboration between FP&A and controllership, and improves confidence in every number that you report.

Joining me is Craig Schiff, founder and CEO of BPM Partners. Craig is a pioneer in business performance management. As a founding member of IMRS Hyperion Software, he helped create and define the field as it evolved from generic business intelligence and analytic applications to BPM. Craig, welcome back to the CFO show.

[00:01:13] Craig Schiff Thank you very much. Always a pleasure to be here.

[00:01:15] Melissa Howatson For our guests who may not have heard you on the show before, can you give a little background on BPM Partners?

[00:01:22] Craig Schiff Sure. So BPM Partners is a vendor neutral management consulting firm focused on the performance management space, alternatively called BPM, CPM, EPM, sometimes just called FP&A solutions. And we help companies identify their requirements, the vendors that could meet that requirements, and then give them a process to evaluate those vendors that they choose the best choice for their company. And along the way, very importantly, get the team on board so there's widespread adoption after they complete the purchasing process.

[00:01:56] Melissa Howatson It's been a while since we last connected. I'm curious, are there any new recent trends that you're seeing in the market?

[00:02:03] Craig Schiff Quite a few, quite a few. First of all, we have this little thing called AI now. I don't know if you've heard about it, but well, for some people it is new. I mean it's interesting because vendors have been delivering AI capabilities for quite some time now. I mean, your company included.

And the traction, the adoption wasn't tremendous. It was surprisingly slow. There was a lot of skepticism and concerns around it and hesitation. And all of a sudden, this year, we've seen a dramatic change. When we're involved in our projects, helping companies select solutions, AI has moved up this year from where it was last year.

Last year was nice to have, interesting. Maybe we'll take a look at that. And this year it's become a top priority. And the CFOs want to learn all about it. So not just the FP&A teams or the controllers and the accounting team that are looking at the functional requirements within the products.

The CFO wants to learn how does this product use AI and how is that going to help us. And it becomes a key decision criteria. We're seeing vendors win deals based on where they are with their AI capabilities. That's a dramatic change from a year ago. Secondly, we're seeing the continued interest and uptake of operational planning.

So, of course, we all started with financial planning, and that's still very important. But operational planning around revenue planning, sales performance management, workforce planning. So the operational planning piece has become a key component of almost every deal that we're involved in. So not just financial planning alone, but operational needs to be there. And then we're seeing where companies are coming from is slightly different.

So for many years, people were coming, even if they were large companies from Excel primarily. That's some other stuff maybe, but primarily spreadsheets and moving to new systems. And there's still some of that out there. But in the past year, our biggest projects have been companies coming from a collection of legacy systems. So they're systems that are being sunsetted, or they never moved up to the latest version of, so they just have an old version of these products.

So it's a mess of systems, basically, and they're just realizing that doesn't work anymore. With the complexities of today's market environment and the need to respond more quickly, that just doesn't cut it. So they're looking for a new one-size-fits-all kind of solution that all those little things that were happening in the corners and different systems that you know developed over the years, some BI tools, some older planning tools, maybe a consolidation tool. That doesn't work anymore. They need a single system to pull all of this together.

And then of course, you know, related to what we're looking at today, consolidation has become, at least on the vendor side, more important. And we'll discuss that, you know, why and where we are in terms of the end user community. But on the vendor side, almost every major vendor now offers a true consolidation solution, which wasn't true a year or two ago. So we've we've evolved pretty rapidly that every vendor that had a solid planning solution now complements that with a solid consolidation solution, every major vendor. Of course, there are smaller, newer vendors who are starting focused on the FP&A, financial modeling capabilities and don't have consolidation.

But in the mainstream, the kind of main vendors that people are looking at today, consolidation is now a key component of almost all those offerings. So a lot has happened actually since we spoke last. I mean, significant changes.

[00:05:30] Melissa Howatson It's been a busy time just listening to you talk about that. It's impressive to see the pace of change that's going on in our space, which I think is what makes it exciting.

[00:05:41] Craig Schiff Yeah, keeps me excited. You know, wake up in the morning and say, “What news am I gonna read about today, who's doing what?” So yes, very exciting. I mean, it is. I mean, the pace of change is accelerated. And you could also say some of that is due to all of the major solutions being in the cloud now, because it's easier to continue to innovate and update those solutions and everyone's always running the latest version, you know, as opposed to the old days where it was much harder to distribute any changes, get everyone up on the same version and then just had to maintain multiple versions, and then that held back innovation.

So the cloud has facilitated, I believe, this environment where we could quickly roll out new capabilities.

[00:06:18] Melissa Howatson Today's topic that we're diving into is consolidation. Are there any specific trends that you're seeing there?

[00:06:26] Craig Schiff There's more options to choose from today. And within those options, though, there's kind of two paths that vendors have taken. Either consolidation as a part of a unified solution with planning, or consolidation as an integrated solution alongside planning. So from a single vendor, but two different products, but integrated at a high-level user interface level and also at a data level. But the products themselves are different products.

Now, of course, the reason that happens is because there were acquisitions in many cases, and the effort it would take to re-architect both their products to be a single integrated unified whole is going to take a long time. Even leveraging AI to help you do some of that, it's still going to take a very long time. So they leave them as two best-of-breed purpose-built solutions with a common interface and integration at the data level. And that's one approach, and then the unified approach is the other approach. And so they both have their pros and cons, but you know, having that new range of options available, vendors that didn't offer consolidation in the past, vendors that have advanced their own consolidation capabilities is pretty important.

So there are great choices out there today and more options than ever before for someone looking for consolidation solutions. And of course, you know, beginning to add AI capabilities to consolidation. AI started mostly on the FP&A side in terms of our world within the performance management world. And you know, that sort of makes sense because you have a wider audience for that. I mean, the number of people that are involved in budgeting and planning is many more than are involved in running the consolidation itself.

Of course, the reporting piece touches a lot more people, but if you want to think where can I have the greatest impact in terms of reaching the largest number of people, FP&A is that area. And also because honestly, FP&A itself has been more popular in the in the performance management space than the consolidation stuff has been, you know, that's a reason that vendors have targeted that. So predictive planning is a common use case that almost every vendor supplies today. But we're seeing that you know slowly changing, and there's lots of good use cases that are beginning to roll out on the consolidation side. And you know, the opportunity there is very large.

[00:08:48] Melissa Howatson Well, and you talk about that popularity. I think that consolidation is often an underappreciated area. We don't talk a lot about it. You just don't read and hear as much about it. But it's pretty critical to a business in terms of getting it right.

Why do you think that consolidation matters?

[00:09:09] Craig Schiff You know, consolidation is critical because when you think about performance management, it's about, you know, planning, monitoring, and executing on my strategy. So I need to plan, monitor, and execute my strategy. Consolidation provides the actuals that feeds the planning process. So, as we do a new forecast, we need actuals to date to do that. Consolidation provides that one version of the truth, the actuals that we use when we're measuring our performance.

How did we do this? This was our plan. How did we actually perform, and what's the variance, and how do we explain it? So it's heavily involved throughout. It's critical to it.

And what's interesting is when I think back on my own history, you know, I was at Hyperion, which wasn't even called Hyperion at the time many years ago. The first product we produced was a product called MicroControl. It was a Microsoft DOS product, and it was in this broadly today called performance management space, but it was a consolidation product. We started with consolidation. Hyperion became a huge success offering consolidation reporting solutions.

That was microcontrol in DOS. And then the first Windows product was the very famous Hyperion Enterprise, which many companies are still using, surprisingly. Again, it was a consolidation product. People force fit budgeting in there. It wasn't built for that.

It was a consolidation product. I should know. I was one of the designers of that product. But people stretched because they loved it and it was easy to use in its time. And so therefore it was meant, you know, they pulled it to do other things it wasn't intended for.

But consolidation came first. Now moving into this century, consolidation is important. And now what I find is people don't necessarily know they need it. So when we meet with a customer or a prospect to find a new solution, they'll say, you know, we need sales performance management, we need financial planning, and we need some reporting. And I said, What about consolidation?

They say, no, no, we don't need that. We do that on our general ledger, or we don't need that. And then as you get into it, some of the things they ask for are functions that are important and that are in consolidation, whether it's about producing the management reports, even within budgeting and planning, doing alternate roll-ups, audit trails, currency conversion. Those are all functions that generally sit under the consolidation functionality banner in at most companies, most vendors when they produce a solution. There are other ways to do currency conversion.

You could just build a model and calculations, but pre-built currency conversion is part of a consolidation solution, and companies need that, but they don't know that they need consolidation to get that. So there is an education that still needs to happen.

[00:11:45] Melissa Howatson It's interesting if there's this gap potentially, yet you've said that a lot of the FP&A players now have this consolidation functionality. What do you see as this relationship between FP&A and consolidation? And why do you think many people are missing this connection to begin?

[00:12:06] Craig Schiff So, first of all, it's essential. I mean, it's a key component. It belongs, consolidation belongs in performance management. Now, people need different degrees of it. If you're not required to do external reporting, you don't need all the rich functionality, but you need the basic functionality that's in there, perhaps even into company matching is a key capability.

They're missing it for a number of reasons. One of the reasons is their ERP provider or general ledger provider says, you don't need that, you get that from us. And by the way, we also offer budgeting and planning. You should get that from us. So there's a little bit of a competitive element to it out there.

Our belief is performance management is designed for business and users, finance self-sufficiency, and all of that should coexist together. So the planning, the consolidation, the reporting should all sit within a performance management solution, with the ERP or general ledger being the source system that has the transactional level details, but then get brought into the performance management system at the same level of granularity, in the same scale, in the same currency that you are using in the planning solution. So all of that coming together is tremendous value for ease of use. It's just speed of turnaround of being able to produce these reports. All that data exists in one place, in one standard format, and again, very importantly, at the same level of detail.

You don't need the transaction-level details in your typical performance reporting. You may want to drill back to them at some point, but you need it at a more summary level, the same level that you're creating your plans at. And then you could easily produce reports from that data all in one place.

[00:13:46] Melissa Howatson Is it a siloed decision or at what level are these decisions being made, and where should they be being made?

[00:13:52] Craig Schiff You know, in our projects, when people are looking at these solutions, we always like to see, you know, the CFO is typically the sponsor who's driving this, but we always like to see a senior FP&A person taking a leadership role, but also the controller or somebody senior from the accounting side of the house. That is absolutely the best project, and we're seeing a lot more of it today. But they come together and find a solution that addresses both of their needs. And their needs are different. Like I said, on the budgeting planning side, there's a large audience, so they're heavily focused on ease of use and solid functionality, of course.

On the consolidation side, they're very focused on accuracy, auditability, complex calculations for allocations and other things that take place on that consolidation side. So they have a different set of what's important to them, and then they go off and find a solution that ideally addresses both and meets both needs. And that, you know, and those are the best projects with the most successful outcomes, I believe. You know, there are companies where they went ahead, and FP&A selected a budgeting planning solution, and then the consolidation people found out about it later, and they're saying, yeah, where are we going to do consolidation? The product they bought doesn't do it to our requirements.

Could you help me find another solution? Of course, we'll help them do that, but that's certainly less than ideal. And the other solution that they'll find, by the way, also could do budgeting and planning. So should we unseat the planning thing that they went off and did on their own. It's ugly.

It's an ugly, you know, discussion to have because each group did their own thing. So that really needs to be avoided. And it's a good, you know, CFO who kind of takes the reins there and makes sure these guys are working together, finding a common solution that meets them in the middle and addresses the needs of both sides. And that's best for the whole company, it's best for the results.

[00:15:48] Melissa Howatson Now let's move on to our audience question segment. Here's the question. What role do you think technology plays in helping finance teams become more strategic? I think technology is critical to helping a finance team become more strategic. If we can find the right technology and put together the right technology stack in terms of how the different parts of the technology talk to each other, the integrations, how they're sharing data, we can really supercharge our ability to get our data quickly with accuracy, spend less time compiling it and more time trying to draw insight out of it.

By doing that, we can help to inform our business and find the time to focus on the strategy and the business outcomes that we need rather than being collectors of data and trying to figure out what is the right data. So I think technology, it's critical to becoming more strategic. When a company is looking at consolidation tools, what should they be looking for?

[00:16:53] Craig Schiff It depends where they are, what they need. So very importantly, you know, you'll still find vendors that say they do consolidation, and they mean the most basic definition of the word they aggregate. They add up all the pieces and give you a summation. That's not consolidation as we're talking about. It's not financial consolidation.

So it needs to be a true consolidation solution. It needs to have some of the basics. So when you look at a financial consolidation solution, it needs to be able to integrate with source systems, obviously important. So look at what source systems you have and see if it integrates well with them. Intercompany matching reports, as well as auto elimination is a pretty standard requirement these days.

Journal entries are part of the process, so you need JE capabilities, minority ownership. Not everybody needs that, but that's something of value, if the system will support that, and then you get into currency conversions, certainly. But then you get into finer points like acquisition and disposal dates. So if you restate a prior period, it knows if it was before or after a particular entity existed. You know, lots of complexities that companies could have in there, the ability to execute parent logic, allocation logic, because those are things that happen during the consolidation process, certain calculations that only occur at the consolidated level.

And then of course, for allocations needing consolidated results to allocate some numbers back based on those consolidated results. And then you look at the whole, you know, last mile of finance piece to it. When you look at close management, disclosure management, some companies need that, some don't. It depends on a lot of factors, but they may already have solutions that do that, third-party solutions, because there are standalone solutions for that, for account reconciliation as well, for example. So those are kind of other components that not everyone needs because either A, they don't need them based on where their business is, or they already have something that works, and they'd like to keep that in place because it works for them.

But again, most of the major consolidation vendors that are part of the performance management world do address those other areas as well. So you really could cover all those capabilities if you need them. And that's kind of you know the roadmap to it. But then of course, you want a solution that's functional. You want something that's easy to use, relatively intuitive.

You want high performance because in larger companies you could have thousands of accounts and hundreds of cost centers. And if you go and make a last-minute adjustment and they're waiting for this consolidation to be done to produce reports or start the next forecast, in today's environment, you can't wait. So you need to shorten that consolidation process so you can get those results out there to feed the forecast and or to produce the performance reports. So you need something that performs quickly. You need some intelligence in there and this is an area that AI could begin to help with.

Something we built years ago at Hyperion was called an impacted consolidation. Meaning if I just went off and adjusted one number in one cost center, instead of doing the whole big consolidation again, which in some cases could take hours, just consolidate the impacted components, the impacted cost centers. Only reconsolidate that branch all the way up, and of course, the top again. But maybe it was a you know a cost center in France. So reconsolidate France, reconsolidate Europe, and reconsolidate total.

You don't need to reconsolidate everything else all around the world. With AI, you could be more precise. If they made one change to one line item, determine a more precision path that needs to be reconsolidated. Maybe it's not every account in those entities that are in that branch. Maybe it was a non-consolidating account and be smart enough to know that.

So we don't need to reconsolidate. It was statistical informational account that doesn't roll up, that's just kept at the detail level. So we don't need to do that. That intelligence is lacking today in a lot of systems. And again, when you get to larger consolidations, that kind of capability could add a lot of value and save a lot of time.

[00:20:55] Melissa Howatson You touched on AI there. Where do you see AI playing a role in financial consolidation?

[00:21:03] Craig Schiff So there are a lot of places it can play a role and it is already playing in certain companies. So when you talk about loading data from source systems, I mean there's a lot involved in that process, and IT needs to be involved to create those connections for you initially. But in terms of getting that data over, creating the mapping, because the chart of accounts in an ERP system, General Ledger, is going to be slightly different in terms of its numbering scheme and everything else to the current to the performance management system. Also, there's a lot more detailed accounts there that we need to sum up into one account on this side. So that mapping, we create that manually today, most of us as we do that.

But to have AI assist in that process and look at those accounts and identify the logical mapping based on the titles of the accounts, they could figure a lot of that out and make recommendations and kind of streamline that process. Huge involvement that AI has had all along with anomaly detection is data quality. As you're pulling that data off, if data is missing or seems to be out of the ordinary, some anomaly that pops up that looks non-standard compared to all the other data that it's seen in prior months for that same account, it can flag all that for us. So it has a huge benefit on the data quality side. And where it can help in the future, again, coming back to how do we shorten this cycle?

How long does it take to close the books, the end of the month, the quarter, the year? And you know it takes a long time, particularly the quarter and year-end. You know, how can we shorten that cycle and free up the resources involved in that process? That's where agentic AI could add value. And I know we're just on the, you know, cusp of that of taking advantage, and some vendors have certainly introduced AI capabilities that focus heavily on the planning side of things.

But on the consolidation side, that whole process of running the loads from the source systems and then bringing that data over here into the performance management system, running the consolidation, running consolidated reports, distributing those reports to the appropriate people, that's something that an agent could do instead of us trying to figure all that out. And an agent could be triggered by an event such as the data's ready to be loaded and consolidated, and start the process and go off and do the process, and if it runs into a problem, flagging it and halting, waiting for human intervention if needed. If not, all of that could be automated and things could just happen in the middle of the night as the things, you know, as things become available, not waiting for us to do something. So that's where productivity gains are going to come. I mean, agentic AI in general, I think everything we've done until now makes life easier, easier access to information, creates more accuracy, better forecasts.

But true productivity, I don't think we've really gotten that yet. And I think agentic AI has the potential, and as some people say, it's almost like hiring another worker who does this stuff. The stuff none of us want to do. You know, want to be doing the more exciting, more strategic stuff. Agentic AI could be doing these things for us.

We just have to learn to trust it. We have to train it properly, and we have to learn to trust it. But when we get there, this will save everyone time. And these processes will move more quickly, and I think more accurately and, you know, not missing a step because they know the steps. They're not gonna forget it, like, we sometimes do.

[00:24:16] Melissa Howatson And who says that consolidation is boring? Look at all these exciting things that are going on in the world of consolidation.

[00:24:22] Craig Schiff It's very exciting.

[00:24:23] Melissa Howatson Craig, thank you so much for joining me today. It's a pleasure as always to hear your insights, what you're seeing with customers and how things are changing so rapidly. Now, as you know, when we have guests on, we do have two rapid-fire questions. So are you ready?

[00:24:39] Craig Schiff Sure.

[00:24:40] Melissa Howatson First one, what is the best piece of career advice that you have ever received?

[00:24:45] Craig Schiff It's a cliche, but you know, do what you love, do what you love, and the rewards will follow. You know, for example, I went to college, I had enjoyed biology in high school. I said, you know what, I'm gonna be biology major, and I don't want to be a researcher, so I'm going to be pre-med, so maybe I'll become a doctor. And so I got into that program and I did that. I liked biology.

What I didn't like is something that was part of the program was or organic chemistry, not my favorite. However, the required curriculum included a computer course. And this was obviously many years ago. Computers weren't as prevalent as they are today in our lives, but it was intriguing, and I took it and I absolutely loved it. I said, forget this pre-med stuff.

My parents are gonna have to live with it. I'm not gonna be a doctor, but the computers, I absolutely love this. And so I became a programmer. I had no plans of doing that when I went into college. And I came out and I was a developer.

And I never looked back. That was the best decision ever.

[00:25:45] Melissa Howatson Well, that change certainly worked out in terms of where it's taken your career, and how many years did it take for mom and dad to get over the change, of course.

[00:25:54] Craig Schiff They were fine. They didn't care.

[00:25:56] Melissa Howatson And the second question, what's one leadership quality that every CFO or financial professional should master?

[00:26:03] Craig Schiff It's really being that strategic business partner in the company. So working with all the other departments, not being siloed and focusing on finance, and you know, people have to come to you and ask for approvals for their budgets. That's not the role you want to have. I mean, you need to do some of that obviously, but you really want to be out there working with the divisions and seeing what their needs are and making sure we could all work together to accomplish this. There's a lot more of that going on in the business today that I see in the companies we work with, and it's very encouraging because that wasn't always the case.

I mean, I remember when I was at the software vendors I've been at, the CFO was the gatekeeper that we needed to beg for funds to do what we needed to do, instead of being in there with us saying, how could we figure this out? How could we make this happen? You guys obviously know what you're doing, you know, you need these funds to achieve the goals of your piece of the business, which plays into the bigger picture. How could we help you do that? That's the attitude we're seeing more of today.

That was not always the way.

[00:27:01] Melissa Howatson Well, it warms my heart to hear you say that's the trend that it's going because I absolutely believe that's the right and only way to run a high-functioning finance team. So glad to hear. Again, thank you so much for your time. Really appreciate it.

[00:27:16] Craig Schiff Very good, my pleasure.

[00:27:19] Melissa Howatson If you've enjoyed this episode, we'd love your support. Follow the show and leave us a rating or review on Apple Podcasts or Spotify. It's one of the best ways to help more finance professionals discover us. For The CFO Show, I'm Melissa Howatson. Until next time.