Designing Chart of Accounts with Analytical Accounting

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Hello,

We are designing the COA for a customer who wants to use Analytical Accounting to implement their Cost Centres, so we are confused about the suggestion of segments distribution that we have to make for their COA.

We would like to know what we have to consider for this scenario keeping in mind that dimensions will be in AA.

Thanks for your help!!

Luis

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Heather Roggeveen 9,150 on at

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Hi

So just to clarify you are thinking along the lines of having a core account code in the chart - i.e. accounting fees and then all cost centres associated held in AA?

If this is the case, I really don't recommend it.

Analytical Accounting is a great tool - but there are complexities in the deployment and use of it. Some things, such as viewing and implementing budgets, integrating, are not as easy. It adds an additional layer to the database that you don't necessarily need.

GP's core account structure works with segments - most sites I deal with use a two or three segment chart:

Cost Centre - Account Code - Breakdown Code (if required).

I also have sites that use Analytical Accounting - the most common uses:

- breaking down Repairs and Maintenance for further analysis - i.e. which piece of equipment, building, vehicle was repaired

- very low level project accounting - i.e. just using it to capture costs for a particular project within a WIP account or directly against the expense accounts

- breaking out vehicle costs to a specific vehicle

Analytical Accounting works best when there is a specific purpose and it is used in moderation. I don't recommend using it across every GL account for every transaction. There is additional data entry required, you can't get good views easily using SmartList and I think the client will become very disillusioned very quickly.

Sounds like you may want to consider using an experienced GP partner to help with this initial design work - the money spent on that is well worth it if it ensures you system is set up right and the users feel good about using it.

Cheers

Heather

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Community Member on at

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Heather,

Thanks for your very well explained answer. A premise for the client is to keep their COA as short as possible, this is why AA is being considered. They are aware about advantages and disadvantages about using AA (at least, they always nod when we are explaining things to them).

Getting back to the original question, in the scenario that Cost Centres are implemented as dimensions in AA, means that there would be a single segment in the COA?

Thank you again!

Luis

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Heather Roggeveen 9,150 on at

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Yes it would. I do honestly think though this is a bad option. All of the core functions in GP link to having the segmented chart naturally rather than the core chart linked to AA. Not sure how easy it will be to even get Management Reporter reports working effectively.

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Mahmoud Saadi 32,738 on at

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Hello Luis

Although I am not a big supporter of Analytical Accounting, I can't deny its advantage of keeping the COA as short as possible. When it comes to this point specifically, I recall a very detailed article on the considerable added value provided by AA; Microsoft Dynamics GP Analytical Accounting Vs. Segments. It shows how AA can reduce the number of accounts from 50,000 to just 10 accounts through a simple business case scenario.

Nothing more valuable to add up for Ms. Heather's comprehensive explanation above. But still I would like to touch upon your most recent question "In the scenario that CostCentres are implemented as dimensions in AA, means that there would be a single segment in the COA?"

In case the cost center is configured on the AA level, there is no need to add any associated segment for it anymore. The pin point, the segment is either handled on the account level, or defined as a dimension on the AA level. We have clients with only one segment and additional AA dimensions for major business financial aspects, such as cost center, branch .. etc. Meanwhile, other clients have seven segments with AA dimensions for minor financial aspects such as expense type, project category ...etc.

It all depends on how you analyse the business and ensure that all the aspects are covered either through the traditional segmentation or with the analytical dimensions as well.

An example of only one segment COA is provided below

Account Length: 5 digits

Account Code: 0 000 0

Digit One (0-9)

1 Assets

2 Shareholders' Equity

3 Liabilities

4 Sales and Revenue

5 (Reserved)

6 Expenses

7 Other Income & Expenses

Digits two, three, four (000-999)

Example

Assets

111 Property plant and equipment

112 Accumulated Depreciation

120 Cash on Hand

Shareholders' Equity

211 Capital

Liability

311 Account Payables

321 Accrued Expenses

322 Unearned revenue

Sales and Revenue

411 Sales

422 Sales Returns

433 Sales Discounts

Digit Five (0-9) Serial Number

Now you can proceed with defining AA dimensions to cover the cost centers, locations, Business Branch ... etc. These dimensions are to be linked with the traditional GL accounts as defined above.

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