The following tip was sourced from Streamlining the chart of accounts at McKesson improves financial reporting and achieves faster closes, a presentation authored and delivered by Ross Wilson of McKesson at recent SAPinsider conferences. Mr. Wilson will present his latest recommendations at Financials 2012, 16-18 October 2012 in Singapore.
Chart of accounts best practices
Determine the scope that the chart of accounts must support: The scope should begin with US GAAP/IFRS legal reporting requirements. Management reporting requirements are Geography, Product, Profit/Cost Centers, and Projects. Tax/Statutory reporting is usually by Legal entity, exclusively.
Design a flexible chart of accounts to accommodate future process and organizational changes. Size of field – 5, 6, or 7 digits is typical, fewer is better
Leave room for expansion – If values 65000-65999 might represent a specific type of expense, ensure there will be no more than 999 different expenses of that same type in the future
Use sub-ledgers when available, remove embedded dimensions. Ensure optimal utilization of sub-ledger (e.g., Assets) and minimize number of G/L accounts required. Fields used for more than one dimension limit the use of standard default values and complicate reporting by making data difficult to isolate. This also complicates the processing of consolidations and allocations, validation/security rules, and reporting
Avoid using intelligent numbers in the design. For accounts, where intelligent numb
ers can help to identify a particular account grouping, use both non-intelligent and intelligent numbers for a particular product, i.e.,120xxx for AR.
Avoid using alpha characters – they will create problems in sequencing and sorting data in reports, assigning codes, using ranges, and when creating validation and/or security rules.
Functionally align team members in the chart of accounts design process, as opposed to geographically – this facilitates the aim of developing a standard COA across global boundaries.
SAP-specific chart of accounts best practices
Consider mapping Group chart of accounts (GCoA) to Operational chart of accounts
in SAP ERP. Ensures accuracy by mapping at source in SAP ERP.
Use condensed form of the SAP ERP operating chart of accounts for
consolidation. Very large group chart of accounts affect consolidations performance and are cumbersome to maintain. Keep in mind level of detail required in Consolidation – less is better, typically.
Consider aligning and synchronizing SAP ERP Group chart of accounts with SAP BusinessObjects EPM chart of accounts via SAP NetWeaver BW. Creates systematic updates to chart of accounts in all reporting systems.
Country chart of accounts for local GAAP – Use local chart or map externally?Useful when entities adopt the same operative COA – Multi-national company. Use country COA and maintain Financial Statement items with alternative account number. China Golden Audit can be met in SAP or via external package.
Be aware that the Consolidation system manages retained earnings and net income for the year as independent value items, as opposed to balance amounts used in the FI System, where no post-able corresponding accounts are represented.
Find more information abou
t this session or Financials 2012 in Singapore.