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4 Tips for Designing the Perfect Chart of Accounts


...keep it as smple as possible, and as complex as required

Whether you are considering a move to SaaS (Software as a Service), or reviewing how your current Finance service performs, it is a great idea to assess whether your Chart of Accounts is fit for purpose.  

 

The Chart of Accounts defines the structure for organising financial data (where your transactions are coded) and will facilitate your reporting.  

 

During the design of a new Chart of Accounts, we often see clients over complicate things with too many dimensions / segments and not thinking about the art of the possible. The need for additional dimensions / segments can be replaced through the use of hierarchies and relationship mapping, for example, a currency dimension / segment is often requested, however, your system is likely to be able to revalue currencies through configuration. 

 

You should keep it as simple as possible, and as complex as required. 

 

Keeping it simple will:   

  • Reduce the maintenance overhead  

  • Provide a structure that is easy to understand  

  • Allow for more efficient processing   

  • Enable ease of reporting 

 

A more complex structure may be required to: 

  • Ensure visible governance  

  • Aid the user experience  

  • Provide flexibility and future-proof your Chart of Accounts. 

 

 

Here are our 4 Tips to Designing the Perfect Chart of Accounts: 

 

1. Consider all stakeholder requirements, not just Finance 

 

It is important to ensure your Chart of Accounts aligns with regulatory requirements, as well as prioritise business requirements for management information to help drive decisions and actions in your organisation.  


Take a temperature check on your current Chart of Accounts: the good, the bad and the ugly. This will help you understand what you need to retain and what can be improved.  


2. Consider the dimensions / segments you will require in the future 

Create a structure that is easy to understand, and that reflects accountability in your organisation. Each dimension / segment planned should be used for a singular purpose, with no dependencies across dimensions / segments. This will result in simplified hierarchy maintenance and provide ease of reporting. 


You also need to consider your hierarchy needs; hierarchies will allow you to consolidate transactions at the different levels required for your stakeholders.   

Remember, your chart of accounts isn’t just for Christmas. We see our clients add a spare dimension / segment to allow flexibility in the future.  


If implementing a new system, you should consider the order of dimensions / segments, ensuring they are logical to aid any rules that you put in place to prevent erroneous postings.   


3. Ensure data is consistent (across areas) and maintained 

 

When considering the codes / structure, keep in mind that they should be used in a standardised way. A structure that is not standardised will result in misaligned reporting and prevent appropriate accountability.  


One client recently rationalised their cost centres; ownership had been diluted in some areas by using additional cost centres which led to them having more tiers of accountability than other areas. This complicated the budgeting and forecasting process with little return, slowed down month-end, and required more support from the Finance team.  


Another client had different project structures across their departments, with portfolios shown by one department at the level others showed projects. This impacted consolidation of data, prevented like-for-like comparisons, and impacted efficient prioritisation and decision making.  


By implementing a process for creating new cost objects and undertaking housekeeping activity, data will be efficiently maintained and set up to date.  


Something to remember, dependent on the system used, once you begin using your new Chart of Accounts, making changes to its fundamental attributes may be difficult and is generally not recommended, so do review and make sure you and other stakeholders are happy before implementing.  


4. Finally 

Once you’ve attained your perfect Chart of Accounts, the greater part of your organisation’s reporting and analytical needs should be met through your system. Time to recycle that ‘I ♥Spreadsheets’ mug.  

 

Contact  

If you have any additional questions or would like to explore how Veran Performance can suuport with your Finance Transformation, contact Jackie (Jackie.neville@veranperformance.com) or Gareth (Gareth.taylor@veranperformance.com

 

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