File

Report
Global Chart of Accounts
Lessons Learnt from 15 years Global
Implementations
Hans Kolbe, Celantra Systems Inc.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Celantra Systems:
Celantra Systems provides international program management services with a strong focus on multi-org, intercompany, global compliance and implementation issues. The key element in our approach is the alignment of
operational efficiency, legal/tax compliance and management reporting. Our goals are:
- Single global structure across country, currency, language, accounting and tax regime
- Variations are transparent to operator and business user community
- Flexibility for business growth, acquisitions, or other changes in business or legal model
- Ease of support and upgrade
Former and current clients include GE, Trident Microsystems, Terex, UPS, Xerox, Tektronix, British Telecom, Assa
Abloy, Yahoo, Texas Instruments, PPG, State Street Bank, Xilinx, Dionex and others.
Hans Kolbe has managed and advised software implementation projects for over 15, global projects for over 12
years. His extensive knowledge on Oracle applications is combined with a formal background as a German attorney,
trained in international and comparative law.
E-mail: [email protected]
Ph: + 1 (415) 730 - 1131
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Agenda
1. Chart of Accounts – Fundamentals
2. Examples and Compromises
3. International Statutory Accounting – Legal COA
4. Local Details in Global COA – example Banks and Tax
5. Additional Reporting Dimensions – which way to go?
6. Are we really locked into our COA structure? How to
make changes
7. Conclusion
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Section 1
COA – Fundamentals
What does the Chart of Accounts provide?
1) Reporting Structure (Dimensions)
2) Framework for Global (finance) Processes
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Chart of Accounts for Multi-Nationals
A Global Chart of Accounts supports consistent global reporting
A Global Chart of Accounts supports consistent global processes.
You can write a standard set of financial reports that each location in each country around the world
can run.
You can design a set of standard accounting processes (for example vendor or customer invoice
accounting) that each location in each country around the world can run.
YOU CAN FOOL YOURSELF OR BE FOOLED:
• Some companies ‘think’ a global chart of accounts means that every set of books has the same
number of segments and they are called the same thing, but underneath they all have unique
value sets and different values.
• Some companies think that a common chart of accounts allows each country to define their
own values in a sub account.
• In both of these cases, the standard financial statement reports will not yield any benefit. If
all segment values are not defined in common value sets you have not achieved your goal of a
common chart of accounts design.
• Single, global chart of accounts, means one accounting flexfield structure, one set of value
sets and one set of values used worldwide.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
What does single Chart of Accounts not mean?
It does not mean that all locations use the same accounts regardless of region, business,
country? Accounts are only used as the location requires them.
It does mean that all variations and additional details for local business or legal
accounting are pre-defined in the global value sets. Variations can be accommodated by
globally provided compliance tools.
It does not mean that all locations have identical processes.
It does mean that all variations and additional details for local business or legal
accounting are pre-defined in the global value sets. Variations can be accommodated by
globally provided compliance tools.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Chart of Accounts – Fundamentals
 Purpose of COA:
• Reporting Structure (Dimensions)
–
–
–
–
Financial Management / Budget / Analysis
Statutory Reporting (Source and Audit Trail for Filing)
Statistical Reporting (used for allocation)
Business Management (Projects, CC, Line of Business,
Region, Sales Channel….)
• Structural Backbone for Global Processes
– Enforce global financial structure and parameters
(processes)
– Capture required global data elements (Reference Data)
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Chart of Accounts – Constraints
 Constraints
• Capture all required dimensions and data elements
– Allow sufficient detail for local statutory reporting
– Needs segment for each reporting dimension
– Allow sufficient length for details and roll-up structure
• Simple, short, easy to understand & train, truly global
– Minimize overhead in operational processing fewer
and shorter segments are easier
– Minimize adjustments to standard reports maximum
length approx 28 chars
 There is no Right Answer! It is a balancing act!
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Chart of Accounts as Reporting Structure
 Global COA Structure needs to be Augmented
− Secondary COA structure for local legal / fiscal reporting
− Additional Trial Balance reporting by business unit, product line
− Additional financial reporting dimensions on Revenue, Margins,
Budget to Actual
− by Region, Country,
− by ProdLine, Cost Center,
− project, customer, sales channel
− So - Do I still need 10 Segments in my COA?
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Chart of Accounts as Reporting Structure
 We have additional reporting tools that can be
integrated
 Challenges – to resolve:
− Which additional tools are in scope and available? BI, Data
Warehouse, HFM?
− Synchronized configuration between systems and instances, COA
&ERP structure
− Reconciliation between the results in different tools!!
− Global Data standards are needed for all of them (Item Master,
Costs, Customers, Vendors, Payment Terms, what else?)
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Section 2
Examples and Compromises
NorCal GEO Training Day August 2012- Copyright Celantra Systems
COA Structure – The Beginning, early 90s.
GL as financial data repository - major Financial Institution
44 characters – 10 Segments
Entity
Account
Cost Center
Activity
Intercompany
Country Code
Product
Service
Regional
Future
XXX
(3)
XXXXXX (6)
XXXXX
(5)
XXXXXX (6)
XXX
(3)
XXX
(3)
XXX
(3)
XXX
(3)
XXXXXXXX (8)
XXXX
(4)
NorCal GEO Training Day August 2012- Copyright Celantra Systems
General Ledger as Data Warehouse
-
No Oracle sub-ledgers. Operational Processes are not integrated to Oracle GL
Legacy Systems are used for daily operations – no Oracle COA is not the primary
structure.
-
Extensive customizations are needed to map legacy systems to Oracle, i.e.
“preprocessors”, customizations, workflows and interfaces.
Consistency of financial reporting is enforced through technical mapping, not
business and finance managers.
Reconciliation, Drill-Down and Audit is difficult.
-
Use of Oracle COA for operational processes is overhead intensive and
cumbersome.
Limited value from some of the segments. They are Zero-filled.
Cross-Validation Rules increase in complexity.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
COA Structure – Now
GL as backbone for primary ledger (transaction structure) –
Example 19 characters – 5 Segments
Suggested Global COA Segments (Transaction Dimensions)
−
−
−
−
Balancing (Company) Segment – Required – 3 digits
Natural Account Segment – Required – 6 digits
Cost Center/Department Segment (roll-up to Dept) – 6 digits
Product Family Segment (roll-up to Prod Line, Bus.Unit) – possibly include
projects - 4 digits
− Intercompany Segment (required for AGIS) – 3 digits
Total 19 digits COA.
Discussion Points:
 Reporting requirements by Bus Unit or Location (TB, P/L, Balance Sheet); Management
Segment
 Location (included in cost center?) – 3 digits
 Sub-Account Segment needed? (for local and stat detail) – included in natural account
segment? . First 4 digits for global values (corp consolidation), last 2 for local detail.
 Projects Reporting, Product Line reporting in Prod Family segment, and in Hyperion and subLedger
 Customer / Region Reporting – P/L or Margin – to be done in Hyperion and sub-ledgers
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Section 3
Local Statutory Accounting
Separate Segment Needed?
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Local Statutory Accounting
Requirement: Many countries have legal prescribed preferred COA
(France, Brazil, China, Belgium) or preferred
Do not use a separate local legal segment – it is not needed and will
punch a hole in your single COA.
Option A) Use Secondary Ledger R12
Option B) Use GL Detail consolidation functionality to transform COA
and accounting rules
Worst Case: Primary Ledger is in Local COA; consolidate to corporate COA. This means
we are admitting defeat. No the mapping table becomes the guarantor of correct corporate
reporting.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Section 4
Local Detail Values
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Section 5
Additional Dimensions –
which way to go?
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Exploration: we need 9 segments for reporting, but want
only 5 for operations (R12 Secondary Ledger-SLA)
Use of Subledger Accounting for Management Reporting- An On-Line Discussion
I. Starting Point and Business case:
Client: US based Multi-National with multi-tiered supply chain, 18 countries.
Application Footprint: EBS Financials and Supply chain including FA. Some CRM; BI
and Hyperion Reporting/Planning in later phase. No Projects modules.
Implementation path: Greenfield Oracle, migration from SAP (50% of BUs; rest from
various other systems). Some shared services in P2P and OM/AR.
Current phase: Design of COA – Multi-Org, Project Plan.
Multi-Org is decided and clear. For COA we decided on at least 5 segments –
Balancing, Nat. Acct, CC, ProdFamily, Interco.
3 other segments are in discussion: Subaccount (for local detail), location (possibly
derived from CC), BU (probably can be derived from Prod Family).
Other desired reporting dimensions are: Customer Grouping, Final Ship-to Region
Grouping; Project Grouping.
I am about to suggest that we build a secondary COA structure with all necessary
dimensions, setup secondary ledgers with the expanded COA, and use subledger
accounting to fill the additional segments wherever we can.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
R12 Secondary Ledger-SLA for management reporting
PROS and CONS of Secondary Ledger (SLA) for management reporting
My PROs:
•Create additional management reporting structure which will reconcile to the primary
GL.
•Keep primary COA slim and efficient
•Encourage business immediately to define global data and rules to establish consistent
management reporting parameters and matrices. SLA rules can be the base line for
later phases to build BI and Hyperion rules.
•Use SLA functionality of simultaneous posting to both ledgers where it is useful.
My CONS:
•I have not used SLA in this way before. I don’t know anybody else who has.
•We will have to build SLA rules for everything – because I have more segments in the
secondary ledger.
•There may be some duplication of effort, when BI and Hyperion are introduced
later. That actually does not worry me, because we will have the main work done
(mapping, define business rules) and establish consistent data.
Please give me some thoughts of encouragement or talk me out of it. We will present
preliminary design to the CFO next week, but I can leave this issue as “under
investigation” for now.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
R12 Secondary Ledger-SLA for management reporting
From Oracle – Architect of SLA – General Philosophy:
We weren’t thinking of using SLA / Multiple Ledgers in this way at design time. We were
thinking of the basic model being Corporate first with national reporting as an automated but
secondary output. There were some caveats to that: we knew you can’t always do corporate
first, so the reverse would often be true, so we consciously approached that too. And we read
corporate as being both external and management, as the management numbers are used to drive
decisions that are in the shareholders interest.
But we weren’t thinking not to do it that way either. So theoretically, your proposal should
work. I like your pros and cons.
There is no necessary relationship between the primary coa and secondary. they need not have
any segments in common. they need not have any value sets in common. the primary can have
3 segments and the secondary 12, or vice versa
only catch is that the further apart the charts are, the more difficult it may be to derive the
secondary from the primary. this doesn't mean you can't do it, just means you will have more
work setting up SLA rules. also remember that for journals that originate in GL like manual
journals and allocations, all you can do is rely on a chart of accounts mapping. deriving 12
segments from 3 would be tricky unless you are going to populate an N/A value into about 9 of
the target segments
NorCal GEO Training Day August 2012- Copyright Celantra Systems
R12 Secondary Ledger-SLA for management reporting
Another Oracle Voice: “ Using a secondary ledger as a "thick ledger" is a
valid option however; it probably depends on the specific customer
requirements. An alternative approach would be SLA Supporting
Reference Balances. The implementor can configure SLA to capture
Customer Grouping, Final Ship-to Region Grouping and Project Grouping
on the primary ledger's SLA journal lines and calculate balances for them.
The advantages of the secondary ledger approach are...
- tracks balances in both entered and accounting currency (supporting
reference balances are accounting currency only)
- can perform GL revaluation at the level of Customer Grouping, Final
Ship-to Region Grouping and Project Grouping
- can use GL allocations to re-distribute amounts to Customer Grouping,
Final Ship-to Region Grouping and Project Grouping
- out of the box reporting (and optional integration with Hyperion)
NorCal GEO Training Day August 2012- Copyright Celantra Systems
R12 Secondary Ledger-SLA for management reporting
Another Oracle Voice Continued: The advantages of supporting references balances
are...
single ledger and therefore...
lighter solution
less maintenance (of COA mappings)
less reconciliation
The disadvantage of supporting reference balances is that there is no out of the box reporting in
R12 (although it is a candidate for a future version - no promises, no dates)
In both cases, you will have established a management reporting structure; the primary COA
remains slim and efficient; and there will be global data and rules.
Either way, you will need SLA rules for everything however; the architecture of SLA is such that
it should be possible to build simple mapping sets that convert from Customer Grouping, Final
Ship-to Region Grouping and Project Grouping attributes (or descriptive flex) to the
corresponding account segment values and share them across all rules (SLA is very modular in
its setup - almost everything can be shared).
I thought of another advantage of the secondary ledger approach - you can build GL hierarchies
on Customer Grouping, Final Ship-to Region Grouping and Project Grouping and report on
them using standard financial reporting tools.”
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Section 6
Are we locked into the
COA? Future Segments
usefulness? Tools
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Tools are available and have been used for 12
years:
Common Experience:
The technical aspects are normally not the key problem. Business group
agreement, executive management backing and project time line are key.
Therefore even for many R12 re-implementations the COA is not changed.
Technically some changes can be simple
- Extending a segment
- Adding a segment (we do not recommend a future segment):
Others are more difficult:
Removing segments, redefining content etc.
Standard tool available – Eprentise; there may be others.
NorCal GEO Training Day August 2012- Copyright Celantra Systems
Thank you !
Hans Kolbe, Celantra Systems
[email protected]
+ 1 (415) 730 – 1131
NorCal GEO Training Day August 2012- Copyright Celantra Systems

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