In the detail-oriented world of finance, where precision and foresight are paramount, financial professionals often grapple with the daunting task of consolidating multiple Profit & Loss statements (P&Ls). This process, while essential for gaining a comprehensive view of a company's financial health, comes with a specific set of challenges, especially for growing businesses with multiple corporate entities, locations, or product/service lines.
The need for P&L consolidation
Companies often find themselves in the position of maintaining multiple P&L statements for a variety of reasons. These may include having multiple business units or entities, operating in different locations or jurisdictions, offering a broad range of products or services, organizing operations into cost centers, or adhering to legal and regulatory compliance. Mergers, acquisitions, and the need for transparent reporting for investors can also drive the necessity for multiple P&L statements. The complexity of modern business operations often demands a granular understanding of financial performance across these different dimensions.
As companies grow and diversify, the challenges in managing and consolidating multiple P&L statements become more pronounced. Finance teams encounter unique hurdles in their FP&A processes when the intricate web of financial data spreads across different business units, locations, or product lines.
This is a common problem among controllers and CFOs. This quote, from the Controller at a multi-entity vineyard and winery in California, is representative of the pain points involved with rolling up multiple P&Ls: “I’d have a spreadsheet with 20 tabs, all of which were linked to a GAAP-based P&L on the first tab. I’d spend hours pulling all the information to it, and once I did, I’d spend more hours ensuring it proofed out… Then you multiply that by multiple LLCs – I was spending days upon days to get the reports out.”
Why consolidating multiple P&L statements in Excel is challenging and costly
While the benefits of managing multiple P&L statements across an organization are clear, so are the problems this process introduces — especially when the finance team is stuck in a decades-old, spreadsheet-only budgeting methodology.
Data granularity: Maintaining separate P&L statements for various aspects of a business allows for detailed analysis, but brings the challenge of handling granular data. Financial professionals must navigate through vast datasets to derive meaningful insights.
Time-consuming manual processes: The manual consolidation of multiple P&L statements, often done through spreadsheets, can be labor-intensive and error-prone. This not only hampers efficiency but also poses a significant risk to the accuracy of financial reporting.
Resource allocation: Managing personnel and overhead expenses across various entities or business units requires meticulous allocation. Without an efficient system in place, this process can become cumbersome and prone to mistakes.
Strategic decision-making: When faced with the task of consolidating P&L statements, financial professionals often find it challenging to isolate specific operations or ventures for strategic assessment. This impedes the ability to make informed decisions that can impact the overall financial picture of the company.
The automation of previously manual tasks empowers Finance to focus on strategic analysis and decision-making rather than wrestling with data consolidation
FP&A software for P&L consolidation — simple and streamlined
To address these challenges, financial professionals are increasingly turning to sophisticated FP&A software solutions, upgrading from broken Excel-only processes. These tools aim to streamline the consolidation process, offering features such as automated data integration, real-time access to financial data, and the ability to generate consolidated reports efficiently.
The same winery and vineyard Controller quoted above adopted Centage’s formula-free FP&A software, and it made a night and day difference for her budgeting and forecasting process: “Creating the budgets this year was a dream. Each budget manager received a copy of their prior year operating expenses and updated them. In turn, I was able to upload those expenses into Centage. I copied last year’s budgets, updated revenue, and expense drivers, edited the operating expenses as needed, updated the personnel module and allocations and had a working draft in short order. As I met with executives and budget managers, I would make the adjustments in Centage. The process has been very smooth.”
Another Centage user was able to shave 24 days a year off his budgeting process by using the software to easily roll-up 25+ P&L statements corresponding to separate cost centers each month:
“Now I close the month in QuickBooks, bring the actuals into Centage, change the reporting period in Analytics Maestro and have it recalculate. The 25 P&Ls and the consolidated version are done within just a few minutes.”
By adopting such solutions, businesses not only save valuable time, but also enhance the accuracy and efficiency of their financial reporting. The automation of previously manual tasks empowers Finance to focus on strategic analysis and decision-making rather than wrestling with data consolidation.
Formula-free P&L roll-ups
Consolidating multiple Profit & Loss statements is an unavoidable aspect of financial management for many businesses, especially those with multiple locations, or eyeing expansion.
While the challenges are undeniable, the evolving landscape of FP&A software offers promising solutions. Leveraging these tools becomes not just a convenience but a strategic imperative for success in a dynamic business environment. Finance teams are often asked to do more with less — just like every other function in an organization. Adopting a tool like Centage can help them capitalize on this higher mission.