General Ledger Chart of Accounts Organization

Posted on: December 31, 2018 | By: Andy Vitullo | QAD Financials

As businesses migrate to new ERP systems,  they should consider a refresh of the General Ledger Chart of Accounts.   Typically, the legacy charts have been in place anywhere from 10 to 20 years.   The business has cycled a number of controllers and accounting managers within the life of the legacy system.  Because of the age the legacy system and the lack of continuity of the accounting teams, ERP Charts of Accounts will become fragmented and large.

The impact of this fragmentation will cause transactional inaccuracy, inefficient closing cycles, and inefficient processes in financial reporting.   Consider the following for the new chart of accounts.

  • Approach each data element digit by digit.   From Left to Right of the data element, define each digit from most significant to least significant.
  • If available in your ERP, enable operational data dimensions to post to the ledger including item groups, customer groups, etc…
  • Lever cost center accounting across the enterprise.   Use common cost center codes for common indirect, sales, general and administrative departments.
  • For the general ledger accounts that define balance sheet and income statement, strive to keep the list in the range of 250 to 350 accounts.

A well designed General Ledger Chart will have tremendous efficiency impacts for the accounting team.  Additionally, the design will enable more robust end of month and intra-month operational financial reporting.

 

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