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Articles Finance Transformation

The chart of accounts: concept & SAP design (R/3 to S/4 HANA)

The chart of account (CoA) is one of the most important structures in business. It reflects all the activities a business is involved in and it provides a foundation for the majority of financial and management reporting. Correct use of the chart of accounts can both simplify operations and improve decision making capability.

Often on accounting projects, there is a gap between accounting expertise and systems expertise, this can result in a poor CoA design. This can easily be overcome by understanding the historical context and modern-day principles that surround the CoA. We can then better understand the implementation options in systems such as SAP ERP or S/4 HANA. This article will look at three topics:

  • Part I: Accounting: history & modern principles;
  • Part II: CoA settings in SAP ERP (from R/3 to S/4 HANA);
  • Part III: Common pain points and improvement initiatives.
Categories
Articles Finance Transformation

A simple guide to cost reduction

Cost reduction and CSR

Whenever discussing cost reduction it’s important to consider corporate social responsibility as a starting point. Ideally, companies can find the right balance between reducing costs and thinking about employee and business partner (e.g. supplier) impacts. Employee layoffs can have a devastating effect on individuals. Business partner changes can put companies out of business. When planning and executing cost reduction these impacts should be considered. In real life, this might mean trying to offer employees other options (reduced hours / different contract terms / new profit-generating roles) or business partners a revised agreement.

A model for cost reduction

A good starting point for cost reduction is to consider the type of costs incurred within the business. Accounting provides a consistent way to look at this. Costs are either tied directly to production or not. For example; in a manufacturing environment there are factories with machines, operated by people to produce products. Cost accounting is used to calculate ‘cost of goods sold (COGS)’. This is the cost that can be directly tied to converting the input materials to the finished product. In this case by adding the raw material, labour and utility costs.

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Articles Finance Transformation Process improvement

Improving the finance record to report process

“A complex, lengthy process, often not well understood”

Starting from business transactions such as the purchase of materials, payment of employees, execution of financial transactions and ending with reporting and decision making; including the submission of detailed annual reports, the record to report process (RtR) is a long, complex process that involves people from across the enterprise.

Despite the critical nature of the process it’s rare to find RtR clearly documented from end to end, few employees can describe the process in detail from start to finish. This could be in part due to the process extending from the core customer facing business through to technicalities of statutory and regulatory reporting. Some excellent papers and books exist, but many focus only on individual aspects of RtR.