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

Knowledge

Timely Decisions

Data

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 thats 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 XXX XXXX
Distribution Division Account Region Story

Projects
XXX XXXXX XXX XXXX XX
Project Type Company Account Department Project

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 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 Lamour 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? High Test Changes in test system Low

Notify Users

Document Changes

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