As finance professionals, one of the more significant values we add to the business is providing insights to line of business managers and other professionals about the performance of their business unit or department. This is beyond dry managerial accounting, I’m talking about intuitive analytics that can provide detailed information on why profit margins are declining, which products are selling, what regions or channels are driving the greatest sales volume and why.
As we all know, this is often easier said than done. We can deploy expensive and complex data warehouses with analytic dashboards that can slice and dice accounting data at precise levels of detail. However, the Achilles Heel in this mix if often our single source of the truth—the general ledger. Over the years we’ve had to adapt the GL’s chart of accounts to enable the capture of detailed postings at more granular levels to support profit centers, cost centers and the like. Often this means expanding the chart of accounts so much that it becomes unwieldy to the point that it becomes a hindrance to basic accounting processes like closing the books. It also increases the likelihood of errors.
I know many finance professionals agree that what we’ve gained in being able to analyze critical business data at more and more granular business dimensions, we’ve had to trade off by making the COA more and more complex. In a sense, we’ve woven a very tangled web.
There Must be a Better Way
With SAP Financials OnDemand, we’ve taken a completely different approach. We start with the organizational unit that we want to measure—it could be a segment, profit center or cost center. To each of these organizational units, we attach a chart of accounts. Notice we’ve already simplified the GL by not embedding the segment, or any other organization element for that matter, in the main chart of accounts.
Beyond simple organization unit reporting, we often want to analyze information for other business dimensions such as customer, channel or even a project if we’re a professional services firm. With SAP Financials OnDemand, that’s easy too—we do it at the transaction level. When creating a journal entry, you can assign dimensions at the line item level through tagging. For example, when we sell a Widget, we create a debit entry in accounts receivable and a credit entry to a revenue account. This is where it gets interesting. With each line item, we “tag” the transaction by assigning a value such as cost center, department, sales organization, customer number or channel. This allocates key data such as the revenue generated, the type and quantity of product sold and other important attributes that are posted in the system’s in-memory data store, to various departments and individuals who need that information via reports, dashboards or KPI’s on their mobile devices. In other words, we’ve turned the general ledger into a system that serves the entire business, not just the accounting function.
This also enables the finance organization to accelerate strategic execution for their business. At the same time, SAP Financials OnDemand boosts their operational efficiency by providing a simplified, trusted, single source of truth that’s designed to drive action from superior insight.
By the way, if you want to see SAP Financials OnDemand’s analytics in action check out this video http://youtu.be/zz-X3JOU3ZA