Management or segmental consolidation facilitates organizations benefit a higher knowledge in their businesses. In this post, we are able to teach you all of the suggestions on a way to get commenced on control consolidation.

Management consolidation, additionally called segment consolidation, specializes in supplying aggregated financial results via the agency’s strategic commercial enterprise companies such as geographical region, business divisions, products, offerings, and types.

At instances, control consolidation leverages statutory consolidation, but it is able to additionally be a completely separate procedure. Management consolidation is ready one at a time to provide customers with a distinct angle on the businesses’ performance.

Unlike prison or statutory consolidation which presents entity-degree and institution-degree performance, control consolidation provides a deeper expertise of your business overall performance by strategic segments, with a level of detail a good way to be vital for selection making and controlling purposes.

In this newsletter, we are able to be discussing what it takes to get commenced on management consolidation, the way to avoid commonplace pitfalls and the way you may set up organizational systems which might be meaningful on your business.

How to get began on control consolidation? What must you are taking be aware of?

Organizational shape

The first and most important step is to set up a logical grouping of commercial enterprise units into respective key segments that are reflective of the control and operations of the commercial enterprise. Commonly, control consolidation ought to accommodate extraordinary stakeholders. In our experience, huge corporations commonly have stakeholders in as a minimum three hierarchy ranges – CFOs, Group Financial Controllers, and Individual Group Accountants. Hence, it is vital to make certain management consolidation is prepared efficaciously to cater to exceptional stakeholders

For instance:

  • Business units for Group CFOs

  • Geographical for the respective region’s Financial Controllers

  • Entities for Individual Group Accountants

Figure 1.0 Example of commonplace organizational structures

In order to higher illustrate this, Apple can group their monetary facts in keeping with enterprise unit performance for distinct product lines along with iPhone, Mac, and wearables for unique geographical regions, and finally how this will have an effect on entity level overall performance. Additionally, Apple might also have an opportunity view primarily based on grouping monetary facts at a geographical stage, before dissecting facts right down to enterprise units and subsequently their various entities. Project-based totally structuring is also normally visible in industries including assets improvement. In our enjoy, property developers can dissect their commercial enterprise based totally on revenue streams, how these are allotted to numerous man or woman tendencies, and sooner or later their improvement overall performance primarily based on geographical regions.

All of the information above makes use of the equal supply of monetary facts but results in various insights when grouped differently.

Note: If the document’s stakeholders request that the business gadgets be reorganized, the report needs to be reorganized as properly, at the side of changes to each intra-phase and inter-segment eliminations.

Report structure

Most of the time, corporations attention on the profit and loss statements which might be commonly a one of a kind format than the felony consolidation. However, rarely do we see management consolidation being prepared at the Balance Sheet and Cashflow level. For businesses with capitalized prices regarding operating commercial enterprise segments, it is probably helpful to have the Balance Sheet prepared to apprehend how expenses will subsequently relate to Profit and Loss.

Note: Additional reclassifications from the overall ledger money owed are required to reap the correct view, e.g. charges may also have to be further categorized as direct or indirect.

If there are extra entries published on man or woman enterprise units that net off on the entity level, reconciling from management consolidation to felony consolidation may additionally pose a mission. This is because criminal consolidation usually affords records by means of entities in preference to enterprise units.

Also, it’s far vital to word that there may be extraordinary classifications and inter-segment eliminations because of unique displays across person segments.

Data Preparation

Depending on how your ERP is based, this will be an smooth process or an exceedingly difficult one wherein facts is required to be loaded for man or woman commercial enterprise gadgets, observed via grouping them into the levels of the organizational hierarchy for the presentation. Subsequently, reclassifications must be completed before mapping the man or woman accounts to the desired reporting structure.


It is vital to report your facts business gadgets to permit correct aggregation. Transactions referring to inter and intra-segments should be tagged directly to the respective entities in place of the transacting business unit. It is frequently inadequate and faulty to depend upon criminal consolidation eliminations for inter-segments and intra-segments elimination.

How to keep away from the commonplace pitfalls all through control consolidation?

At the stop of the day, the accuracy and completeness of your financial data is paramount to the ease of carrying out management consolidation. In order to obtain this, there are some guidelines we would endorse on your records recording technique:

  • Have a clean understanding of how your enterprise is based and feature it pondered in the dimensions of your ERP, especially the commercial enterprise gadgets for each entity, and correspondingly the transacting associate code.
  • To facilitate the recording manner, have your supplier put into effect automatic rules if there are consistent transacting partner(s).
  • Define your chart of debts to flexibly accommodate each felony and management consolidation reporting, via ensuring that the nature of transactions for the enterprise can be recorded in particular.
  • If it isn’t possible, consider additional dimensions to tag key bills, specifically the ones regarding expenses with the aid of their nature e.g. direct or indirect.
  • Reports extracted from their source device(s) to put together control consolidation have to be from the same source as legal consolidation. This can help to reduce reconciliation efforts.
  • Apply the shape used in the management consolidation for budgeting and forecasting to allow benchmarking.
  • Your Management Consolidation Checklist

    As you tools up for control consolidation, there are 3 key factors we might suggest retaining in thoughts:

    Information: Management consolidation is established to show pinnacle line, direct and oblique costs. If each phase has distinctive revenue streams or derived through specific structures, they have to be damaged down respectively. There must be a proper manner established to make certain statistics is recorded to the desired degree of element.

    Presentation: Management consolidation may be supplied by means of the enterprise divisions or products and even by using projects, whichever is most meaningful on your enterprise. However, you need to constantly have sufficient info protected in your information to allow for further analysis along with performance by using character divisions, merchandise, offerings geographical region or entity.

    Measurement: Your management consolidation must additionally permit for a assessment of the real results to the price range and forecast facts to understand the performance of your business.

    What is an easier manner to do management consolidation?

    At LucaNet, we help our customers with their control consolidation woes with our technological solution and consulting information. Our device is designed to permit finance teams to experience higher records management, consolidation automation, related monetary statements and custom reports. All of to be able to can help you take a shortcut to a a success control consolidation procedure.

    If you’re geared up to take on management consolidation, test out our solution made for your desires: