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

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Emtec Finance and Technology Summit Presentation with Jason Rapisand

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

  1. 1. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. Chart of Accounts Design May 12, 2015
  2. 2. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. What We Will Cover… • Definitions • Designing the Chart • Rules and Tips • Q & A 2
  3. 3. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. • 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
  4. 4. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. • 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
  5. 5. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. Definitions
  6. 6. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. • 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
  7. 7. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. • 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
  8. 8. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  9. 9. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  10. 10. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  11. 11. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. Designing the Chart
  12. 12. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. Inputs and Outputs 12
  13. 13. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  14. 14. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  15. 15. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  16. 16. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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 Allocations Territory Direct Labor Asset Protection Performance Measures International Sourcing Growth Plans Cost Containment Financial Disclosure Maintenance Capital Events SG&A Metrics Revenue Growth Gross Margin Metrics New Markets Budget Factors 16
  17. 17. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  18. 18. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. Rules and Tips
  19. 19. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. • 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
  20. 20. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  21. 21. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  22. 22. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  23. 23. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  24. 24. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 73% YEARS 47serving clients OUR COMPANY 500dedicated associates 17 over years BEST PLACES TO WORK 2012 TECHNOLOGY EMPOWERED BUSINESS SOLUTIONS “right size provider” “client for life” India Pune Bangalore USA IL, PA, NJ, GA, VA, MN, FL Canada Toronto Ottawa GLOBAL DELIVERY OUR SERVICES 87% 14 prior 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 infrastructure enterprise reporting, predictive analytics, big data service management enterprise infrastructure end user computing Business and Technology Empowered
  25. 25. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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
  26. 26. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. Emtec Services Align Well with each stakeholder community ENTERPRISE SUITE 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 POWER The of Emtec
  27. 27. Emtec, Inc. Proprietary & Confidential. All rights reserved 2015. 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

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