Designing an Effective Chart of Accounts
Structure using Oracle Applications
Richard Byrom
Oracle Applications Consultant
SAOUG October 2003
Agenda
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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
Knowledge
Data
Timely Decisions
Information
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/Services
XX
XXX
XXXX
XXX
XXX
XXX
Company Cost Centre Account Product Product Line Sub Account
• Distribution (News)
XX
XXXXXX XX
Division Account
XXX XXXX
Region Story
Distribution
• Projects
XXX
XXXXX XXX
Company Account
XXXX XX
Department Project
Project Type
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
Headquarters
management structures.
Subsidiary A
Subsidiary B
Subsidiary C
Modular considerations
• Which modules are being implemented and how
do they impact the Chart of Accounts.
Payroll &Human
Resources
Manufacturing
subledgers
Oracle
General Ledger
Financial
subledgers
Third party interfaces and systems
• Ensure your Chart of Accounts design considers
the impact of third party interfaces and systems.
Third Party System
Payroll &Human
Resources
Manufacturing
subledgers
Oracle
General Ledger
Financial
subledgers
Consider Oracle Capability to meet
your requirements
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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.
Set of
books
Chart of accounts
structure
Accounting
calendar
Functional
currency
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
ACCOUNT TYPE value set
people
Value
Description
1000
1110
1120
1200
1220
1310
Total Assets
Cash
International Cash
Accounts Receivable
Other Receivables
Interest Receivable
CASH ACCOUNTS ONLY security rule
Include
1101 to 1199
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 Required
Change
Obtain
Authorisation
Significant?
Low
High
Test Changes in
test system
Document
Changes
Notify Users
Notify Users
Make changes
on production system
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.
Speaker Information
Name: Richard Byrom
e-mail: richard@rpcdata.com
richard@richardbyrom.com
Company: RPC Data Ltd
Web Site: http://www.rpcdata.com
http://www.richardbyrom.com
Mobile: +256-77983245