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Enterprise Dimension Management (EDM):

 

I plan to undertake a journey of discovery whereby we shall try and use SAP MDM for chart of accounts maintenance- a critical component in EDM. I shall start by outlining the compelling business case for chart of accounts consolidation. Then I shall try and model chart of accounts in SAP MDM. We shall also try and analyse shortcomings if any in the current release (hmm…. hierarchy version creation, syndication of hierarchies need to be explored).

 

This is the first part of a series on chart of accounts management using MDM. The target audience is beginner level business users and architects in the financial domain.

Background:

The chart of accounts is a list of account names and numbers used in a company’s general ledger. It is one of the most important business dimensions that the accounting team manages.

Larger corporations, particularly those made up of dissimilar businesses or that operate in different tax jurisdictions, can have multiple  chart of accounts in these business units. Mergers further complicate the picture, since an acquired company almost always will have accounting approaches and systems that diverge from the parent’s. Hence the overhead required to manage this critical dimension increases with corporate growth and success, thus having an adverse affect on the quality of data, resources to ensure accuracy, timeliness of results and compliance with governance standards.

When two companies merge and try to merge their accounting systems that have different charts of accounts, lots of discrepancies have to be reconciled before the merged entity can even know for sure how much money it is making or losing.  When the merged company finally agrees on the new chart of accounts, it may be almost impossible to compute performance trends because the historical numbers may not be convertible to the same structure as the current numbers.

Objective & Benefits:

The main objective of harmonizing chart of accounts is to speed-up the consolidation, closing and reporting cycles by reducing the amount of manual work involved. Other benefits include greater transparency and limiting the chance of fraud and errors that are the inevitable by-product of any manual system.

As the basic requirement for all statutory and internal reporting of information stored in the accounting ledgers, key drivers for standardizing the chart of accounts include:

1.     Multiple lines of business/geographical operations—consolidation of different G/Ls and ERP systems for comparison reports and group level summaries

2.     Organisation reschuffling—efficient chart of accounts management through mergers & acquisitions, restructuring, reorganization, and even new regulatory legislation or management reporting requirements

3.     Business Performance initiatives—effective synchronization of chart of accounts reporting with BPM’s key performance indicators and metrics

Hence, taking a MDM approach to standardizing the chart of accounts empowers finance with a best-practice business management process to centralize and directly manage the structure of this crucial corporate data.

The promise of MDM is that by creating a software-defined abstraction level, top-down decisions about the “virtual” chart of accounts can be effected without having to change underlying systems. Moreover, having an abstraction level should enable companies to have parallel rather than sequential or iterative consolidation paths for statutory, management and tax accounting. This would produce a faster, cleaner financial reporting process, simplify and accelerate management reporting, and allow companies to centralize control over financial and managerial reporting if they prefer and manage tax implications far earlier in the closing cycle than is possible today.

Using master data management eliminates the often time-consuming activity related to mapping because it allows reporting directly from local systems. As a result, the management accounting cycle can be cut, often by days. Using MDM to resolve the chart of accounts also can improve data quality. Since it automates the data classification, it enforces consistency in the way data is aggregated so subsequent analysis will be more consistent, too. Reducing the ability to manipulate the system, via efficient data governance can enhance accountability. In addition, enforcing consistency in how data is treated can expose overlooked but persistent gaps in communications between regions, business units and headquarters, an issue all global companies face.

Part1:Chart of accounts hierarchy maintenance in SAP MDM 5.5 SP05

1.1     Lets start by trying to upload a chart of accounts into SAP MDM. The source data is downloaded from SAP R/3 into an excel sheet.

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1.2   Now, since excel is not an updatable data source for MDM, this data needs to be uploaded to a database like oracle, MS Access etc… In a live business scenario, Import manager shall be used in conjunction with SAP PI to import this data into MDM.

 

So, lets import this excel sheet into MSAccess.

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1.3  Then , lets log into the SAP MDM console and create a hierarchy table and two fields in this table for storing the account number and description

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Now starts the task of importing the chart of accounts hierarchy into this table.

1.4  Log into the import manager and specify type as :Access and provide the path for the access database.  

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1.5  After logging in, the source and destination files need to be specified in the pane below the main toolbar. A preview of the source data shall be available in the source preview tab.

image 1.6  We shall select the two fields simultaneously that make up the hierarchy in the source file and right click. Then “create hierarchy field” needs to be selected.     

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1.7   In the “create hierarchy” dialog box, the child filed and node name field names need to be selected from the drop down. The parent field needs to be specified as none.

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1.8  On pressing OK, MDM shall create the hierarchy field using the delimiter specified as default.

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1.9   Lets move to the tab “map field/values” and  map the hierarchy field to the long text field in destination

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1.10  In the value mapping pane, values in the source file need to be added as child to the main node in destination file.

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1.11 After selecting the import action, records shall be imported into the hierarchy table.

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1.12 The imported records can be viewed in the data manager.

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In the next part, we shall delve into the next steps for chart of account maintenance and consolidation in SAP MDM.

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