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
Division Account Region Story Distribution

Projects
XXX XXXXX XXX XXXX XX
Company Account 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
management structures. Headquarters

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

Financial
Manufacturing Oracle subledgers
subledgers General Ledger
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

Financial
Manufacturing Oracle subledgers
subledgers General Ledger
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

Functional
Chart of accounts currency
structure Accounting
calendar
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 Build a Hierarchical
accounts, revenue, expense, Structure
owners equity.
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

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

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 Obtain
Authorisation Significant?
Change
Low
High

Test Changes in
Notify Users
test system

Document Make changes

Notify Users
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