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Best practice when it comes to account structure

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Posted on by Anette Jansson

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I am about to set up the account structure in the first of our group companies to have Dynamics 365. All group companies will share a common Chart of accounts, but not common account structures.

I have consulted two different experienced consultants and get different answers. One says to set up one account structure per "account -string", that is one structure for only main account (no dimensions, vat, rounding), one structure for balance accounts( two dimensions), one structure for cost accounts (three dimensions) and one structure for revenue accounts (four dimensions). He says that I should have ranges and use advanced rules for rules and limitations. Personally I don´t like that there is no indication that an advanced rule is connected to the line in the account structure.

The other one says that from a BI perspective it is better to only have two structures, one for BS and one for PL, and to have all dimensions visible for all accounts. It is also easier for the accountants making manual entries if the string is always the same. He also recommends to skip the advanced rules and add all accounts and restrictions in the structure. It will make a long list but is fair enough to maintain with Excel.

There are pros and cons with both, and I have never worked in a live system. How would you recommend me to set up the account structure?

/Anette

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saurabh bharti 15,039 Moderator on at

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RE: Best practice when it comes to account structure

Hi Ludwig,

For No 2: Why is it always good having 'BS' and 'P&L'?

For No 3: Why is it always suggested using financial dimensions for balance sheet accounts?

Explanation: Financial dimension's major role is to define KPI's which can be used for organization's financial performance reporting. Now most of the organization does different analysis for P&L e.g. Business unit wise P&L, Cost center wise cost analysis, Department wise cost analysis etc... .

There are organizations who do similar analysis on BS as well but KPI's will be very few and most of the time this will be single dimension where organization wants that to be balancing dimension that means they will generate complete TB based on that dimension e.g. Business unit wise TB.

Now , why we should avoid having dimensions for BS items (except if dimension is going to be balancing dimension) because it is really difficult to sett-off balance sheet transactions by dimensions.

E.g. Lets say we have Location as dimension and made this mandatory for BS item, now we received two invoices from two different locations for same vendor but when we release the payment we release combine payment for both the invoices together then at that point which location dimension we will select against "Vendor Debit" ?

Invoice -1: Vendor A-Location_1 Credit 1000

Invoice-2: Vendor A- Location_2 Credit 1000

Payment : Vendor A_Location? Debit 2000

This is my point of view. Any better suggestion will be appreciated !!!

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Community Member on at

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RE: Best practice when it comes to account structure

Anette, The account structure should be built around what you need, typically more towards the first approach.

Balance sheet accounts- typically only list the main account, except for the inventory accounts. A lot of times, they will break inventory accounts out by product/product group etc.

COGS, REV, & Expense Accounts are going to be broken down more granular, and will

What dimensions are you planning on using?

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Anette Jansson 105 on at

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RE: Best practice when it comes to account structure

Hi,

yes thank you very much. Even though I don´t know my exact setup yet, I have figured out how to attack the problem

Best regards

Anette

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Ludwig Reinhard Microsoft Employee on at

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RE: Best practice when it comes to account structure

Good Morning Anette,

Has your question been answered?

Would be great if you could keep us updated whether some additional help/information is required.

Many thanks and best regards,

Ludwig

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Ludwig Reinhard Microsoft Employee on at

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RE: Best practice when it comes to account structure

Hello saurabh bharti,

Can you comment on your no 2 and 3?

For No 2: Why is it always good having 'BS' and 'P&L'?

For No 3: Why is it always suggested using financial dimensions for balance sheet accounts?

Many thanks,

Ludwig

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Anette Jansson 105 on at

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RE: Best practice when it comes to account structure

Thank you! it is coming together, piece by piece.

BR

Anette

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saurabh bharti 15,039 Moderator on at

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RE: Best practice when it comes to account structure

Hi Anette,

Here are few suggestions from my experience:

1. Before deciding the accounting structure , we should first define the Chart of account in such a way that applicability of financial dimensions are defined at "Main Account Category" level not a individual Main account

E.g. 301001,301002....30100N are my Main accounts under Main account category "301" so we should have applicability of FD at 301 level not that 301001..301004 will use dimension or set of dimension and 301005...30100N will use different dimension or set of dimension.

2. It is always good to define two accounting structure "BS" and P&L" , if there is any exception we should allow blank to the accounting structure for the "Main Account" range

3. It is always suggest-able that not to use financial dimension for balance sheet item , if require Business unit, Site can be used for the same

4. If there is a requirement of having Common chart of accounts and having different accounting structure across entity, first you should avoid to have different because during consolidation you will not be able to consolidate at FD level

5. If require having different accounting structure then use "Advance Rule" structure for the same

Hoe this Helps you!!!

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Rahul Mohta 21,032 on at

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RE: Best practice when it comes to account structure

from maintenability perspective, keeping it granular may help

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Anette Jansson 105 on at

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RE: Best practice when it comes to account structure

Thank you guys for your answers.

I think I know how to attack this issue now. I will create a matrix with different types of accounts where I mark which dimensions are not applicable, optional or required.

From that I will decide the number account structures, leaning towards one or two (taking the budget control issue into account), and I will keep the same accounting string for accounts where manual posting is allowed, not to confuse users.

BR

Anette

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Ludwig Reinhard Microsoft Employee on at

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RE: Best practice when it comes to account structure

Good Morning Anette,

I am more in favor of the second option that used a BS and PL structure only.

Yet, I want to challenge you :-) with the following question: Why not use only one single account structure?

Another 'thing' that needs to be taken into consideration and that you have not mentioned above is budgeting and budget control. The latter one works only in combination with a single account structure. In other words, if you have multiple account structures and want to enable budget control then you have to decide for one account structure that can be used for budget control.

Finally, think about maintenance of the whole stuff. I once saw a project with 30+ account structures and the only one who was able to tell you and and where those structures were used was the finance guy who setup the stuff but then left the company... Easier and simpler if sometime better :-)

All the best,

Ludwig

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