Consolidation using alternative hierarchies

Description

blank should provide the flexibility to view, analyze, and manage financial data based on different organizational structures. This feature allows companies to model and understand their business from various perspectives, accommodating changes, or potential changes, in their structure or strategic focus.

Example Use Case

Scenario: An enterprise-level company operates in multiple geographies with several business divisions. Using their CPM software, they want to see consolidated financial reports based on different hierarchies such as geographical location, product line, and division.

Solution: With alternative hierarchy functionality, the company performs a consolidation based on the geographical hierarchy to get a comprehensive view of regional performance. At the same time, the company switches to a division-based hierarchy to consolidate and understand the financial performance of individual business units.

Considerations

Many products have a core hierarchy, with alternative hierarchies setup that leverage components of the core hierarchy. In other words, as data comes in to the core hierarchy, the alternative hierarchies will inherit that data. This saves the user from having to maintain two totally different sets of data and imports. It also provides confidence that the user is reporting on the same set of data.

We see this used in situations where it may be necessary to report by manager instead of cost center. Cost centers are not always a reliable way to report on how a business is actually run. Sometimes it is used to plan for a re-organization in the business, which means it is used as a “what-if”.

Lastly, this does not necessarily mean consolidation in the financial reporting sense. This can be simply a roll-up in a planning environment.

Questions to Ask a Vendor

• Data Consistency: How does your system maintain data consistency when changing between different hierarchical structures?
• Reporting Adaptability: How adaptable is the reporting functionality with regard to the use of alternative hierarchies for consolidation?
• Hierarchy Alterations: How straightforward is it to introduce, modify, or remove hierarchical structures in your system?
• Show Me: How can I create an alternative hierarchical structure - right now? Or do we need consultants to build it out for us?