The chart of accounts has a huge impact on how efficiently you do business. As the foundation of the finance function, a well-designed COA helps you effectively manage your organization, while a poorly designed one is a tremendous burden. Companies that did not consider long-term growth when planning their COA will eventually find it unsuitable.
A good COA offers flexibility for recording and reporting, provides structure for managing business uniformly, and enhances communication.
Five fundamental criteria for a good COA design:
1. One type of information
Have only one type of information in each segment of your COA, and one type of information in only one segment. Otherwise, the chart suffers from an overlapping of information across segments, creating inaccuracies. Keeping information types unique to a single segment eliminates mistakes and solidifies consistency.
2. Information not repeated
Your accounting flexfield should not repeat information that exists in other modules of EBS. For example, if you are implementing the Oracle Projects module, there’s no need to have a COA segment dedicated to tracking projects transactions. Keep information in discrete buckets, including other applications of your EBS environment.
3. Room to expand
A common downfall is to tailor the COA to your current business without considering growth. In the design phase, overestimate your segment lengths to accommodate future values. What may seem like a lot today might be wholly inadequate in a few years.
4. Logical ranges used
Ranging your values logically promotes streamlined reporting, security and maintenance, enabling you to minimize the number of cross-validation rules, security rules and Financial Statement Generator report definitions by defining your rules and reports by ranges as opposed to individual values.
5. No reliance on spreadsheets
Spreadsheets are fine tools for short, small and inexpensive projects, but avoid using them extensively. Eliminating spreadsheets promotes a streamlined workflow, reduces resource requirements and maintenance, and removes the need to integrate your EBS environment with third-party applications. Moreover, you will get faster reports using built-in EBS features.
As your organization considers the need to redesign its global chart of accounts, incorporate these criteria into your approach. R12 adds much functionality, and a simplified COA allows you to take advantage of the new functionality while reducing operating expenses. Don’t miss out on the opportunity to get ahead of the competition – learn how eprentise can help you change your chart of accounts.