By Randy Kardas, CPA, MBA
With so many options available in the enterprise resource planning (ERP) software market it can be difficult to pick the solution that best meets your reporting needs and ensures your data is complete and clean.
There are a variety of considerations needed to achieve your reporting objectives. Here are just a few:
- An ERP system that will help with making informed decisions and taking action quickly.
- The right partner, which can mean the difference between having operational solutions sooner rather than later.
- A lean chart of accounts that establishes the foundation for all financial reporting: the decisions at inception will impact your business years down the road.
- Define dimensions that are tailored to your organization’s needs and customize them to include additional attributes that can be rolled into financial and operational reports.
- Integrate relevant data through dashboards and reporting tools, which is essential for getting the most out of your ERP system.
Consider the following scenario. A professional services company creates sales invoices in QuickBooks Online. When a sales invoice is created, a customer, a service item, a memo description, a price, and number of hours is entered. Neither class nor job is tagged to the transaction because the system is not configured to capture this information. The company primarily works with nonprofits, but recent shifts in demand have brought in clients from other sectors, such as banking and wholesale distribution. Unfortunately, these verticals would not be captured at the transactional level in QuickBooks because they are not tracked in a class or profit center dimension.
Add to this the fact that the company has gone multinational with clients in three countries. Again, the company does not have a process to track the country in its customer records nor the ability to tag a country at the transactional level because a country dimension does not exist. This means reports by country are unable to be created without performing extra data preparation/transformation.
There is a lot of data slipping through the cracks!
ERP systems need to be set up to capture as much data in the best possible way to obtain informed, real-time, actionable insights.
Don’t Do It Alone!
To set up a vital ERP system that is responsive and flexible, calling in an expert is not an admission of defeat. In fact, it may be one of the smartest decisions you can make. Your ideal partner will have accounting systems expertise and real-world experience. They will be highly communicative, and you will continuously learn how to be more efficient in the workplace and resolve issues with accounting processes. Their expertise will take you step-by-step from your current state to your desired future state. Sure, it may be possible to walk this path on your own, but why? You will be adding difficulty and stress to your already hectic life, extending implementation time as you learn on the fly, and delaying the substantial benefits your system can offer.
Chart of Accounts
A lean chart of accounts (COA) establishes the foundation for all financial reporting. This happens at a system’s inception, and your decisions now will impact the business years down the road. Designing the COA is a crucial step in establishing a solid foundation. Having a lean and clean COA often leads to data entry efficiencies.
Getting there can be difficult, especially if your legacy system contains duplicate general ledger accounts representing the same expense but are differentiated by department. For example, 6501–Office Supplies-Sales, 6502–Office Supplies-Marketing, 6503-Office Supplies-Plant. Your COA could be simplified. A single general ledger account, such as 6500–Office Supplies, would suffice. Sales, Marketing, and Plant are all operational departments that should be maintained elsewhere in the system and tagged to transactions. This is called Dimensionality.
Dimensions and Customization
A dimension is a tag that is built into the system’s reporting engine that, when captured in transactions and in master data, enables you to filter, sort, group, and expand data visually. For example, a location dimension might represent your physical offices since you may want to understand profitability by physical office. You would create a record for each physical office you have within the location dimension to capture this information. Then, in every revenue and expense transaction (sales invoice, vendor invoice, etc.), you would tag a physical office. This enables you to generate a profit and loss statement by office and drive accountability to office managers.
Dimensions are tailored to your organization’s needs and are flexible. Many times, they can be customized to include additional attributes that can be rolled into financial and operational reports. For example, each of the following may be separate fields within a record of a project dimension:
- Project manager
- Budget amount
- Sales force external ID.
Suppose you are required to report all revenue and expense by project for each project manager (PM) on your team, and each PM needs to receive their own project report monthly. To accomplish this, the project dimension must contain a field that captures the PM name or ID. If all revenue and expense transactions have a project tagged, and all projects have PM tagged, projects can be put into dimension groups by project manager. Each PM Project Group can be used as a filter option within dashboard views and report outputs. The depth of reporting and insight becomes greater.
Dimensions provide an ability to establish hierarchies that can be used to enhance expand-by reportability. Dimension hierarchies are embodied by parent-child relationships. Let’s say, for example, you use a department dimension and budget at the detail level – Accounting, Finance, Human Resources, and Information Technology (Child Departments) – but management prefers reports on these administrative shared services at a summary level. You would create a parent department (non-posting) called “Shared Services.” Within each of the child departments, you would tag a parent department. For each child department, you would tag “Shared Services,” thereby giving you the ability to expand reports into both a detail and summary level.
Integrating Relevant Data with Dashboards and Reporting Tools
Likely, there are multiple systems that contain relevant information needed to make decisions. It is important, therefore, to identify what capabilities your ERP system has in relationship to the following features:
- Connecting to multiple data sources
- Defining the frequency of data source refreshes
- Creating relationships between data sources
- Cleaning the data
- Transforming the data
- Deriving measures (i.e., KPIs)
- Designing dashboards and reports
- Establishing user permissions
- Drill-down capability from dashboard to underlying transactions
- Integrating with third-party tools that enhance existing features or add new capabilities
Third-party tools provide opportunities to achieve your analysis objectives by tapping into the strengths of niche software providers. It is difficult to find a single software product that has all the features you require to meet your business needs. Because of this, you may benefit from leveraging third-party tools with proven expertise in their respective niches and integrating them into your ERP system. Sage Intacct is a prime example of a best-in-class cloud accounting system that integrates with many third party tools.
A well-functioning ERP system is essential to the success of any business. By establishing a strong foundation for your accounting system, you can ensure that you have the real-time insights you need to make smart decisions and take action quickly.
Randy Kardas, CPA, MBA is Manager, Digital Platforms & Analytics at Cherry Bekaert Advisory LLC in Lancaster, PA and responsible for systems implementations, consulting, and integrations with a focus on Sage Intacct. He can be reached at email@example.com.
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