designing an effective chart of accounts structure using oracle applications
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Designing an Effective Chart of Accounts Structure using Oracle Applications. Richard Byrom e-mail : [email protected] Agenda. Presentation assumptions & objectives Why an effective chart of accounts? Some common mistakes Proposed methodology for effective design

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Presentation Transcript
agenda
Agenda
  • Presentation assumptions & objectives
  • Why an effective chart of accounts?
  • Some common mistakes
  • Proposed methodology for effective design
  • Additional tips and ideas
  • Conclusion
assumptions
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
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
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
Knowledge

Timely Decisions

Power

Information

How to empower your organisation

Data

some common mistakes
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.
proposed methodology
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
generic design issues cont d
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 d13
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
Country, Industry and Organisation Specific Considerations
  • Country
  • Type of industry
  • Organisation – multi-org, number of sites,information types
  • Modules implemented
  • 3rd party Interfaces and systems
country considerations
Country Considerations
  • Check whether localisations and/or statutory accounting requirements affect your chart of accounts
industry considerations
Industry Considerations
  • Manufacturing/Services

XX XXX XXXX XXX XXX XXX

Company Cost Centre Account Product Product Line Sub Account

  • Distribution (News)

XX XXXXXX XX XXX XXXX

Division Account Region Story Distribution

  • Projects

XXX XXXXX XXX XXXX XX

Company Account Department Project Project Type

organisation type
Headquarters

Subsidiary A

Subsidiary B

Subsidiary C

Organisation Type
  • 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
Manufacturing subledgers

Financial subledgers

Modular considerations
  • Which modules are being implemented and how do they impact the Chart of Accounts

Payroll &Human Resources

OracleGeneral Ledger

third party interfaces and systems
Third Party System

Manufacturing subledgers

Financial subledgers

Third party interfaces and systems
  • Ensure your Chart of Accounts design considers the impact of third party interfaces and systems

Payroll &Human Resources

OracleGeneral Ledger

consider oracle capability to meet your requirements
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 Infrastructure

Set of Books consists of your Chart of Accounts, Calendar and Functional Currency

Set of

books

Functional

currency

Chart of accounts

structure

Accounting

calendar

segments
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
Value Sets
  • Length
  • Numeric and alphanumeric
  • Security
chart of accounts values
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
  • 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
Security Rules
  • Allows you to create specific views for certain people

ACCOUNT TYPE value set

Value Description

1000 Total Assets

1110 Cash

1120 International Cash

1200 Accounts Receivable

1220 Other Receivables

1310 Interest Receivable

CASH ACCOUNTS ONLY security rule

Include 1101 to 1199

aliases
Aliases
  • Allows you to develop names that are familiar to your organisation
statistical accounts
Statistical Accounts
  • Dedicated Statistical Accounts.
  • Shared accounts which contain statistical and monetary information.
constant renewal
Constant Renewal

“There will come a time when believe everything is finished. That will be the beginning”

Louis L’amour – Bestselling 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
Significant?

Obtain

Authorisation

Low

High

Test Changes in test system

Notify Users

Notify Users

Make changes

on production system

Document

Changes

Chart of Accounts – suggested maintenance procedure

Identify Required

Change

additional tips
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 tips32
Additional Tips
  • Use the Oracle ADI Account Hierarchy editor for mass edits and Big Picture View
additional tips33
Additional tips
  • Use auditing tools to establish whether your setup is correct
    • CRM analysis tool (note 167000.1 Metalink)
    • Demonstration
conclusions
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.
speaker information
Speaker Information

Name : Richard Byrom

e-mail : [email protected]

Company : RPC Data Ltd

Web Site : http://www.rpcdata.com

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