designing an effective chart of accounts structure
TRANSCRIPT
Designing an Effective Chart of Accounts Structure using Oracle Applications
Richard Byrom
Oracle Applications Consultant
SAOUG October 2003
Agenda
• Presentation assumptions & objectives• Why an effective chart of accounts?• Some common mistakes• Proposed methodology for effective design• Additional tips and ideas• Conclusion• Questions & Answers
Assumptions
You are either: -.– Preparing for a new implementation.– Presently implementing.– Have already implemented but could benefit from
enhancements and improvements.
You have an approved methodology for implementing your system and each of the steps mentioned here will fall within the phases being used in your implementation methodology.
Objectives
To emphasise that building an effective chart of accounts is dependant on using the right “mix” of people, processes and technology.
To give you the techniques and methodologies involved in designing a chart of accounts so that you can maximise your return on investment.
Why the need for an effective Chart of Accounts?
• It is the heart of the system into which all modules and interfaces flow.
• Ease of Use.• Flexibility.• Provides a good foundation for further expansion as well
as appropriate storage of current and historical information.
• Provides the basis for timeous management reports and financial statements.
• To ensure implementation success and continued use of the system.
How to empower your organisation
Data Information
Timely DecisionsKnowledge
Power
What happens when you empower your organisation?
Some common mistakes
• Gather existing chart of accounts and modify to incorporate Oracle functionality.
• ONLY the Finance Department designs and understands the chart of accounts.
• The implementation partner is made responsible for designing the Chart of Accounts.
• No consideration of impact of country, industry and organisational factors on reporting requirements and Chart of Accounts Structure.
• Past, present and future .• Inadequate summarisation of data in GL. Replication of
same data between sub ledgers or modules.
The eternal paradigm
Proposed Methodology
• Generic Design Issues.• Issues relating to your country, industry and
modular setups.• Take into account Oracle Specific functionality
that may be useful in the design process.• Continuous Improvement.
Generic Design Issues
• Begin with the end in mind.– “To begin with the end in mind means to
start with a clear understanding of your destination. It means you know where you are going so that you better understand where you are now and so that the steps you take are always in the right direction” – Stephen Covey.
Generic Design Issues Cont.d
• Gather management reports and financial statements or design new ones. Then work backwards to arrive at your Chart of Accounts Layout.
• Consider organisational growth and diversification plans –be proactive, not reactive.
• Start with a basic structure and then enhance. However, ensure there is a match between level of detail and ability to maintain this – KISS.
• Ensure that you work well with your implementation partner.
• Use all the tools Oracle Provides you with to manage the process – ADI, Workflow,Tutor,Alert.
• Develop a set of standards and conventions.
Generic Design Issues Cont.d
• Team work within the organisation – particularly important for Multi-site.
• Hold workshops.– Ensure users understand the importance of an
appropriate design infrastructure.– Establish procedures for maintenance and update -
Centralised or decentralised approach.– Agree on standards and conventions.– Ensure that the chart of accounts is signed by all the
parties involved – that’s one way to ensure peoples involvement and acceptance.
• Third party review.
Country, Industry and Organisation Specific Considerations
1. Country.
2. Type of industry.
3. Organisation – multi-org, number of sites,information types.
4. Modules implemented.
5. 3rd party Interfaces and systems.
Country Considerations
• Check whether localisations and/or statutory accounting requirements affect your chart of accounts.
Industry Considerations
• Manufacturing/ServicesXX XXX XXXX XXX XXX XXXCompany Cost Centre Account Product Product Line Sub Account
• Distribution (News)XX XXXXXX XX XXX XXXXDivision Account Region Story Distribution
• ProjectsXXX XXXXX XXX XXXX XXCompany Account Department Project Project Type
Organisation Type
Headquarters
Subsidiary A Subsidiary B Subsidiary C
• A single company with all offices in one country.
• An international company with offices overseas but a single reporting structure.
• A multinational company with subsidiary companies, each with its own reporting and management structures.
Modular considerations
• Which modules are being implemented and how do they impact the Chart of Accounts.
Manufacturing subledgers
Financial subledgersOracle
General Ledger
Payroll &Human Resources
Third party interfaces and systems
• Ensure your Chart of Accounts design considers the impact of third party interfaces and systems.
Manufacturing subledgers
Financial subledgersOracle
General Ledger
Payroll &Human Resources
Third Party System
Consider Oracle Capability to meet your requirements
• Set of Books infrastructure.• Segments and Value Sets.• Cross Validation and security rules.• Aliases.• Statistical Accounts.
Set of Books Infrastructure
Set of Books consists of your Chart of Accounts, Calendar and Functional Currency.
Accounting calendar
Set ofSet ofbooksbooks
Chart of accounts structure
Functionalcurrency
Set of Books Infrastructure – Multi org
Oracle Statement per Appsnet http://www.oracle.com/appsnet
Oracle Applications strongly recommends that our customers convert to Multi-Org as soon as possible. We make this recommendation to prepare for improvements to performance across the E-Business Suite as well as to prepare for supporting Multi-Org Access Control, an upcoming feature of the E-Business Suite. Read the white paper Release 11i Use of Multiple Organizations in Oracle Applications for more information.
Segments
• Definition – an area of analysis within your business.
• Recommend using 5-7 segments with a spare segment for future growth.
• Define each segment name and the order in which it appears in such a way that data capture is facilitated.
Value Sets
• Length• Numeric and alphanumeric• Security
Chart of Accounts Values
• Attach a list of valid values to each segment.– Child Values identify the
specific components of a segment.
– Parent Values define a hierarchy or summarisation of child values.
– Ensure each a/c has appropriate categorisation Asset accounts, liability accounts, revenue, expense, owners equity.
Build a Hierarchical Structure
Cross Validation
• Cross-validation rules let you control the combinations of accounts entered for particular segments.
• Example 1 – ensuring that for all income statement accounts a department is specified whilst for balance sheet no department is specified.
• Example 2 - Ensuring that for all revenue accounts a product is captured.
• The advantage is that posting errors can be reduced, however if they are two restrictive then posting errors will not be reduced.
Security Rules
• Allows you to create specific views for certain people
1000 Total Assets1110 Cash1120 International Cash1200 Accounts Receivable1220 Other Receivables1310 Interest Receivable
ACCOUNT TYPE value setACCOUNT TYPE value set
CASH ACCOUNTS ONLY security ruleCASH ACCOUNTS ONLY security rule
Include 1101 to 1199
Value Description
Aliases
• Allows you to develop names that are familiar to your organisation
Statistical Accounts
• Dedicated Statistical Accounts.• Shared accounts which contain statistical and
monetary information.
Constant Renewal
“There will come a time when believe everything is finished. That will be the beginning.”Louis L’amour – Best selling Author.
• Although certain designs are permanent never be happy with your chart of accounts. Always look for improvements but maintain a balance.
• This applies particularly to large organisations where improvements can be made on cross validation, security rules and aliases.
• Make sure any changes are validated in test and then copied to production.
Chart of Accounts – suggested maintenance procedure
Identify RequiredChange
Obtain Authorisation
Significant?
Notify UsersDocument Changes
Make changes on production system
Notify UsersTest Changes in
test system
HighLow
Additional Tips
• Spreadsheet template (demo).• Data Loader for loading your data into Oracle.
Available at http://www.comstar.co.uk (Also see presentation).
• Coding tips.– Ranges and coding.– Make sure you provide for growth.– Create meaningful patterns within the coding structure.
Additional Tips• Use the Oracle ADI Account Hierarchy editor for mass edits and Big
Picture View
Additional Tips• Alternatively use the Account Hierarchy Manager in E-Business Suite
found under GL Super User Responsibility>Setup>Accounts>Manager
Additional tips
• Use auditing tools to establish whether your setup is correct– CRM analysis tool (note 167000.1 Metalink)– Demonstration
Conclusions
• Oracle E-business suite provides a highly effective mechanism for enabling a powerful chart of accounts design.
• Processes outside the system as well as the people aspects are equally important in ensuring an appropriate COA infrastructure.
AQ&
Speaker Information
Name: Richard Byrom
e-mail: [email protected]
Company: RPC Data Ltd
Web Site: http://www.rpcdata.com
http://www.richardbyrom.com
Mobile: +256-77983245