COA Design Changes, and the Impact on your Ability to Report and Analyze your Business - Emtec, Inc.

Emtec, Inc. Proprietary & Confidential. All rights reserved 2015.

Chart of Accounts Design

May 12, 2015


What We Will Cover…

• Definitions

• Designing the Chart

• Rules and Tips

• Q & A

2


• What can I do to maximize reporting capabilities but

minimize complicated accounting?

• We use the General Ledger for all our reporting

• Our budget process takes so much time to prepare

worksheets

• We could close in five days if we didn’t have all these

consolidations and eliminations offline

• We need to hold managers accountable but they don’t

feel like they have adequate visibility

• We have so many accounts we no longer use

CHART OF ACCOUNTS DESIGN – What We Hear From Clients

3


• Better visibility into financial performance

• Align financial structure with the organizational goals

• Unify accounting across the entire organization

• Allow for a budgeting structure that can scale

• Improved expense accounting

• Logical accounting structure

• Provide a mechanism for future growth

Impacts of a Chart of Accounts Change

4


Definitions


• Foundation for an organization’s financial record keeping system

• Accounting structure that allows an organization to measure

performance of the companies, divisions, departments, sales and

individual goals it represents

• Uniform format for financial measurement of an organization

• Reflects the lowest level of detail desired for financial reporting

• It is the empty scorecard for an organization

Chart of Accounts

6


• Chart of Accounts are defined by separate segments that

are a short hand representation of an entity to be reported.

• Chunking numbers into distinct buckets that represent a

given dimension for easier recollection.

• Allows for a cube look at an organization and measurement

of performance.

• Each segment represents a different view of the financial

information.

• A segment should have a unique purpose.

• Segments are the driving dimensions for financial reporting.

Segmentation

7


Segmentation Example

01

02

1000

2000

3000

100

200

Company Account Cost Center

01.1000.100 01.2000.100 01.3000.100

01.1000.200 01.2000.200 01.3000.200

02.1000.100 02.2000.100 02.3000.100

02.1000.200 02.2000.200 02.3000.200

By segmenting values into distinct dimension, an account can easily be

identified and numerous combination can be created.

8


Parent Child Relationships

OPX

5000

Parents Child

NOP

5200

5100

6000-6999

Parents of

Parent

EXP

Using Parent-Child Relationships, accounts can be grouped for financial

reporting. It will ease the process for consolidations and roll up reporting.

9


Statistical Accounts

• Accounts that represent a statistic that enhance the measurement of

organizational performance

• Examples include Headcount, Square Footage, Quantities, etc.

• Utilizes the dimensions to segment the responsible party for the

segment.

• Visible on Financial Reports

• Allocation basis of shared services. Examples:

- HR costs allocated by % of company headcount

- Facility costs allocated by % of square footage

- IT costs allocated by % of users

10


Designing the Chart


Inputs and Outputs

12


Organizational Structure (HR)

• Departments

• People

• Management

• Responsibilities

• Approvals

Financial Structure

• Budgets

• Costs

• Financial Segregation

• Sales Credit

• Assets

Chart of Account Implications

• Ensure that the chart aligns to both the Organizational and Financial

Structure

• Allows for a financial representation of an organizations budget and

costs

• Allows for managers to measure department performance objectively

• Organizational Roll ups should be mirrored in the Financial Structure

Organizational vs. Financial Structure

13


Why Global?

• Chart of Accounts that can be used by all

• Allows accountability to managers and responsible parties

• Gives one source of financial performance

• Consolidations/Elimination ease Faster close cycle

• Certain Exceptions:

- Regulatory compliance (FERC)

- Statutory requirements (French chart of accounts)

- Completely separate businesses (Joint Ventures)

Goal : Unify your organization on a shared chart of accounts that is

scalable and provides visibility to the performance of the organization at

all desired levels.

Global Chart of Accounts

14


Listing of Segments typically used by organizations

• Natural Account: Determines Asset, Liability, Equity, Revenue and

Expense

• Company: A legal entity or management entity that requires a

balance sheet

• Cost Center/Department: Organization that incurs expenses

• Profit Center: Organization that is responsible for revenue

generation

• Division/Business Unit: Segment of a company responsible for

both revenue and expenses

• Location: Allows for Revenue and Expense for organizations with

multi-locations

Other segments may include Project, Activity, Intercompany, Product

Line and Future Use

Typical Segments

15


Budgets and Performance Measurement are critical factors in

determining the structure and values.

Budget Factors

Organizational Sales Operational Capital

Management

Structure

Product

Reporting

Material

Cost% of Revenue

Overhead

AllocationsTerritory

Direct

Labor

Asset

Protection

Performance

MeasuresInternational Sourcing Growth Plans

Cost

Containment

Financial

DisclosureMaintenance Capital Events

SG&A MetricsRevenue

Growth

Gross Margin

MetricsNew Markets

Budget Factors

16


Overhead

• Company

• Division

• Department

Sales

• Company

• Division

• Location

• Product

Operations

• Company

• Division

• Department

• Location

Capital

• Company

• Division

• Location

Consolidated Budget

Dimensions of different budgets help determine the structure of the

Chart of Accounts.

Chart of Accounts Structure that would support budgeting:

Company / Division / Department / Account / Product / Location

Budget

Segmentation

Budgeting Structure Example

17


Rules and Tips


• Natural Account

- Number your natural account in the order it would appear on a

financial statement

- Utilize a group of numbers at the beginning or end for

Statistical Accounts

• Department: Group departments logically, Operational, Sales,

Back Office, etc.

• Avoid using dependent segments – causes problems in

consolidations and dimension reporting

• Limit the size of a segment to no more than 6 digits, too hard to

remember more than 6

• Limit keystrokes when necessary, 5 digits = 100,000 values

• ALWAYS LEAVE SPACE FOR GROWTH AND CHANGES

Numbering Segments

19


Operational Data

• Costs by Supplier /

Employee

• Liability by expense

• Sales by Item

• Sales by Sales Rep

• Sales by State

• Treasury activity

Financial Data

• Costs by division /

department

• Liability by company

• Sales by product

• Sales by channel

• Sales by location

• Account Balances

General Ledger data should be general. Operational reporting

systems can provide detailed analysis, the chart of accounts should

track information that is provided in Financial Reporting.

Operational vs Financial Data Examples

20


Questions to Ask

• How do you measure performance?

• Who is responsible for budgets?

• What are the business dimensions of your business?

• What are your Legal Entities?

• What is your HR organizational structure?

• What systems utilize the Chart of Accounts?

• How do you measures sales?

• What are your reporting needs?

• How do you allocate costs?

• What Financial information are you currently tracking off-line?

• What can be tracked operational reports as opposed to housing in the

General Ledger?21


Tips

• Think Globally

• Group a dimension into one segment

• Try not to use one segment for more than one purpose

• Operational Data needs to be reported on in operational reports, not in the General Ledger

• Use Parent/Child relationships to group segment values

• Statistical accounts should be for those in financial reporting and allocations

• Use contra-accounts for allocations

• Logical grouping of numeric ranges allows for easier report and parent account maintenance

• Avoid “Smart Numbering” within a segment

• Number segments logically leaving room for growth and changes

• Organizational Structures change – leave space to scale

• Segments determined by the need to see information by A and B and C…

22


Continuous Improvement – Chart of Accounts Change Impacts

We have changed our chart of accounts, what is next?

• Reporting Improvement

- Taking Financial Reports to the next level

- Electronic delivery

- Operational reports enhancements

• Process Improvement

- Creation of budgeting workflows and approvals

- Automated consolidations/eliminations

- Allocation improvement

•Financial Improvement

- Better operating metrics

- Benchmarking

23


73%

YEARS

47serving clients

OUR COMPANY

500dedicated

associates17

over

years

BESTPLACES

TO WORK2012

TECHNOLOGYEMPOWERED

BUSINESSSOLUTIONS

“right size provider”

“client for life”

IndiaPune

Bangalore

USAIL, PA, NJ,

GA, VA, MN,

FL

CanadaToronto

Ottawa GLOBAL

DELIVERYOUR SERVICES

87% 14prior tier 1

consultancies

avg. years

experience

fulltime

employees

OUR PEOPLE

25+

OTHER

PARTNERS

- onshore

- offshore

- nearshore

- blended

managed services

Advisory Applications Cloud Analytics Infrastructure

strategy

governance

process

ERP, HCM, CRM,

app. development,

mobile solutions

applications

infrastructureenterprise reporting,

predictive analytics,

big data

service management

enterprise infrastructure

end user computing

Business and Technology Empowered


An Exciting Year For Emtec… And Or Clients!

Vertical Focus

• Strategy

• Enterprise

Solutioning

• Management

Consulting

• Line of Business

Expertise

Advisory Services Expansion

Services

GEO

Vertical

SMAC


Emtec Services Align Well with each stakeholder community

ENTERPRISESUITE

SALES & MARKETING

360 degree view of the customer

Sales force automation

Customer Service

Marketing Automation

Customer and Product Data

Management

BI / Analytics

HCM

Workforce Planning

HR Analytics

Talent Management

Employee Self-Service

Performance Management

Total Compensation

CFO

FINANCE

Budget & Planning

Financial Close Mgmt

Procure to Pay

SEC Reporting

Financial Analytics

Cash Management

OPERATIONS

Forecasting

Operational Analytics

ERP

Project Costing

TECHNOLOGY

Advisory Services

Application Development &

Maintenance services

Business Intelligence & Big

Data

Cloud Strategy and

Implementation

Independent Verification &

Validation

Infrastructure Services

Managed Services

IT Service Management

Procurement Services

Business Strategy

Managed Services & Outsourcing

Advisory Services

Analytics

Governance

POWERThe

of Emtec


THANK YOU FOR YOUR TIME

Please visit us online at www.emtecinc.com

THANK YOU FOR YOUR TIME

Please visit us online at www.emtecinc.com

http://www.emtecinc.com/

http://www.emtecinc.com/

Date post:	19-Jul-2015
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