Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone! This is Emily, and I’m a digital transformation consultant with Hyperbots, Inc. I’m pleased to have Dave on the call with me. Dave Sackett is the VP of Finance at Persimmon Technology, thank you so much for joining us today, Dave.
Dave Sackett: Yeah, thank you, Emily.
Emily: So, Dave, the topic we’ll be discussing today is debit or credit entry postings and the different nuances across ERP systems like QuickBooks, SAP S/4HANA, and NetSuite. To keep it brief, my first question is, how do the postings of debit and credit entries differ across these ERPs specifically when a vendor invoice is posted?
Dave Sackett: Okay, to answer that, I’ll categorize by small, medium, and large data requirements. QuickBooks might have the simplest and shortest journal entries in terms of debits and credits, followed by NetSuite, then SAP. SAP has a lot more complexity and required fields to post a transaction, so it’s a bigger effort in SAP compared to QuickBooks. NetSuite falls somewhere in between.
Emily: Understood. Thank you, Dave. Moving on, what are the main differences you’ve seen in tax handling among QuickBooks, SAP, and NetSuite when posting vendor invoices?
Dave Sackett: Similar to the number of fields each system requires, when it comes to tax compliance, there are tools that each ERP can leverage for tax assistance. QuickBooks, which I’m currently using, is quite simple. NetSuite offers more functionality and good APIs for tax services, while SAP is the most complex and thorough ERP, especially in handling international taxes.
Emily: Understood. So, Dave, what unique features does SAP S/4HANA offer for handling vendor invoices that differentiate it from QuickBooks and NetSuite?
Dave Sackett: With SAP, there’s a far greater opportunity for granularity in data tracking. You can track by vendor, region, or almost any business-specific criteria, which allows for detailed outbound reporting. It’s very complex, with many required fields, which support robust data tracking and reporting. So, if in-depth tracking is important, SAP might be the best choice.
Emily: Understood. Since you mentioned you’re currently using QuickBooks, what limitations does QuickBooks have in handling complex vendor invoices compared to SAP or NetSuite?
Dave Sackett: QuickBooks is generally geared toward small businesses, treating data somewhat like a checkbook. It doesn’t offer the depth of analytics found in NetSuite or SAP, which are better at tracking vendor assignments, purchase history, and FP&A analytics. So, compared to the other two, QuickBooks is limited in data gathering and analysis.
Emily: Understood. Also, Dave, how can AI-based external tools help improve the accuracy and automation of GL posting?
Dave Sackett: That’s an excellent question. Each ERP system can support AI integration, and the more complex the system, the greater value you gain from having API connections to third-party solutions for enhanced accuracy and automation.
Emily: Understood. Thank you so much, Dave, for discussing the differences between ERP solutions and explaining how AI can enhance them. It was great having you, and thank you for joining us today.
Dave Sackett: Yeah, thanks, Emily.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily, and I’m a digital transformation consultant at Hyperbots, Inc. I’m pleased to have Shaun again with us. He is the stock compliance manager at Norfolk Southern, so great to have you on, Sean.
Shaun Walker: Absolutely, thanks for having me.
Emily: Of course. So the topic that we’d be discussing today, Shaun, is ensuring accurate GL coding of expenses. I’d like to begin by asking why it’s so important to ensure that expenses are coded correctly under the right GL codes, and what are the main challenges that companies face in this area.
Shaun Walker: I’d say it’s essential for financial reporting, budgeting, and compliance. It ensures that the financial statements reflect the true state of the company’s finances, which supports better decision-making, compliance, and alignment with regulatory bodies. The main challenge is the volume of expenses, especially in large organizations. There are so many expenses and transactions to go through, which means there’s a risk of human error.
Emily: Got it. Often, what I’ve seen is that sampling is used to check the accuracy of expense coding. Can you explain how sampling works and give examples of its advantages and limitations?
Shaun Walker: Absolutely. As I mentioned, there’s a large amount of transactions, so sampling drills down to the important ones. For example, a company might use a random sampling approach, looking at 5% of all the expense entries rather than all of them. One advantage of the sampling approach is that it’s more cost-effective and time-efficient. However, a limitation is that it may not detect systematic errors or fraud if those errors are not present in the specific transactions sampled.
Emily: Got it, understood. Also, Shaun, how do automation or automation tools in general help in ensuring correct GL coding? What are some examples of their use in companies?
Shaun Walker: Absolutely. Automation tools have predefined rules for certain expense transactions, which reduces the need for the manual process of coding and the associated errors. For example, an ERP system like SAP might automatically categorize all expenses with the heading “hotel” as travel expenses. However, some limitations can be too rigid. For instance, if there’s the word “event” in expense management, some tools might automatically categorize it as marketing, even if it was an internal training session that should have been coded differently.
Emily: Got it. Shaun, what role can AI play in improving the accuracy of expense coding? Can you provide examples of how this is implemented in practice?
Shaun Walker: One technique that AI uses is NLP, which stands for natural language processing. It analyzes transaction descriptions and suggests the most appropriate GL codes. For example, if the description is “client dinner at a restaurant,” AI would correctly code it to entertainment and expenses rather than just food and beverages. AI can also detect anomalies in real-time, helping to catch errors early and maintain accurate records.
Emily: Understood. Just out of curiosity, how can AI help in auditing human-coded expenses, and what are some examples of its effectiveness?
Shaun Walker: AI can learn from historical data to identify what correct coding should look like, comparing it to current entries. It can also flag discrepancies or unusual patterns.
Emily: Got it. Just to round things up, Shaun, one last question: are there any additional benefits of using AI over traditional sampling methods for auditing expenses?
Shaun Walker: The main thing is that humans often do it periodically, like once a month or once a quarter, whereas AI can perform continuous monitoring. AI can detect anomalies immediately, rather than waiting for periodic reviews. It can also analyze a much larger set of data, covering 100% of the expenses, whereas sampling might only cover 5% or less.
Emily: Understood. Got it. Thank you so much, Shaun, for talking to us about GL coding and how accuracy can be maintained. It was great having you, and the discussion was truly insightful. Thank you so much.
Shaun Walker: Absolutely, thanks for having me.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hey, everyone, this is Emily, and I’m a digital transformation consultant at hyperbots. I’m pleased to have John Silverstein on the call with me, who is the VP of FP&A at Extreme Reach. So thank you so much for joining us, John.
John Silverstein: No problem. Thank you for having me.
Emily: So, John, the topic that we’d be discussing today is managing and scaling the chart of accounts in Quickbooks online. The 1st thing that I ask you is, what are some of the key considerations when setting up a chart of accounts in Quickbooks online for a small business?
John Silverstein: Yeah, when setting up the chart of accounts for QuickBooks online, it’s critical to be simple and logical. But you also need to look forward a little bit to the growth of your business. Look at your business model and the industry standards because you want to be aligned with how that’s going to be, and how you can look at your financials compared to either other companies, or if you eventually go for a sale or you acquire another business. It’s good to be in line with that. So assets, liabilities, equity, revenue, expenses. You want to make sure that those are broken out into the proper categories for that industry and that it also meets your regulations. You wanna enable the account number early. This is a big mistake. I see a lot in the smaller businesses that they just name, and their names are all over the place, and they change over time. So it’s hard to trace and understand the data. As it moves. And so it’s if you enable the account number, and it’s easier to integrate into work with other systems. As you and your business grow. So it’s important to implement that as early as possible. It. It creates a little bit of extra work, but it’s not that much.
Emily: Got it. So, John, as a business grows, how can it maintain an effective chart of accounts in QuickBooks online without having to move to a more complex ERP system?
John Silverstein: Yeah, it’s surprising how flexible and how good and what rigor and things you can get into QuickBooks online if you enable the right things. So it’s important to work with your accountants, and if you don’t have one internal, but if you are the accountant and things that you look at and leverage. You know the platform of QuickBooks like classes, locations, and the other dimensions that are there. So you don’t have to overcomplicate. I see a lot of companies that don’t enable classes until it’s too late. And again, it gets really hard. And you’ve overcomplicated your chart of accounts to try to do something that really could have been solved by classes or locations and things like that. So it’s also important to try to understand what those dimensions are. It goes back to the 1st question about industry and things that you do. So segment the data. You have to think about how you’re gonna measure and monitor the business review and monitor and make sure that that chart of accounts is always in line with how you’re gonna do it. If there are any redundant accounts close or inactivate them, make sure they’re properly categorized. Use sub-accounts, use a hierarchy that helps out. And you can go pretty far with QuickBooks online. I’ve been in companies that have made it to that 100 million dollar mark on QuickBooks. So it. It does scale more than what many would expect.
Emily: Got it. Got it. So any common mistake, John, that you’d have seen small businesses make when setting up their chart of accounts in Quickbooks online?
John Silverstein: Yeah, one of the things is there, the biggest thing. And this goes across the board. Any system has too many accounts, and they don’t enable the other dimensions and things. So then you try to use an account for everything, account per vendor, account per customer, and things like that Just remember that there’s reporting and things that can get you there without having to break it out in your chart of accounts that overcomplicate it, and then there are more mistakes, and it causes a lot of confusion as you bring in new people Or you might have to have another accountant or other people look at it, or your management looks at it and things, and it gets more confusing, and it even makes it harder for audit as well, and it creates a lot of clutter.
Emily: Got it, got it. So how can businesses create a flexible and scalable chart of account structure that supports growth?
John Silverstein: Yeah. The best way to do this is to make sure that you have a numbering system that allows for the expansion. And to do, add-ons and things, and to make sure that you’re you, you can change the names without affecting other reporting and things you don’t want to leave gaps between you. You need to leave the gaps in between the account numbers, so you can add accounts and easily use sub-accounts to track more detailed information. So you can have the details when you need to answer certain questions and have it at your fingertips. Make sure that you have that available, and then you plan on growing. So you have those spaces and things, and then this approach will allow you to keep it simple but also have detailed financial analysis and reporting.
Emily: Okay, why, exactly, is it important for different businesses to regularly review and optimize their chart of accounts in QuickBooks online?
John Silverstein: Yeah, it’s critical to ensure that the accounts reflect how your business is today. If you’re selling new things, maybe your models change. Maybe you were initially transactional or your pricing wasn’t, it was more value pricing and things like that. Or, yeah, when you’re smaller you might have more to give. But as you grow and things, it’s critical that you have the information. There, the accounts reflect your current business operations. What does your cost structure look like, are you in? Is everything in the house? Are you doing things yourself? Are you outsourcing those types of things? You must have that at your fingertips. You also don’t want to have to roll up many redundant accounts or account hierarchies even to try to get an answer in your financials, so make sure that you continue to look at it. So you know which accounts to use when you’re answering the questions that you have on your finances, and it also alleviates the errors of things going to too many different places. And then you have to try to figure out how to map it all back together.
Emily A: Got it. Got it. So, John, can you explain the role of AI in maintaining charts of accounts, integrity, and QuickBooks online?
John Silverstein: Yeah. So AI, and this is something that’s gonna have a significant impact. Going forward is on the chart of accounts because it can keep that integrity, it can also have the knowledge to recommend and detect errors between how? What’s posting? To which accounts, and as long? It can make sure that the definitions are consistent on what’s going on, and it can recommend even when you should create a new account and break it out. It could also tell you that you have duplicates or missing entries. So AI algorithms, it’ll enforce consistency in accounting. It’ll make it easier to do analysis, it’ll make it easier to be compliant. You’ll have clarity on where things should be booked, and why. It can also have predictive analytics to suggest. Hey, you need a new account. You need a subaccount. This is a hierarchy and to go into the patterns of transaction history to recommend that. You can also have real-time data validation. So your book closes and things will be faster and more accurate. This is critical as you go through to make sure you have consistent financial data.
Emily: Got it so little bit about ERP migration, John. So how can I help a business that is considering migrating from Quickbooks online to, let’s say, a more complex ERP system like NetSuite?
John Silverstein: Yeah. So if AI could help you start getting there, the more you’re aligned with how the bigger Erps work and you have classes already set up. You have the things set up in QuickBooks online that are more aligned with NetSuite. It’s easier to migrate, and your process is if and flows. If they’re proper and doing the same things as some of these other Erps, it may make it better data, integrity, and continuity, and easier to go through the conversion without having to do a lot of data cleanup it also can automate your reconciliations and validations through the migration to make sure that everything’s in sync it’ll save a lot of time. Reduce the errors. Maybe the Erps will get a little bit worse. 3. Letter acronym. It will become a little more doable and foreseeable to go into an ERP that makes more sense for your business without a huge lift in cost and time.
Emily: Understood. And just one last question, John. So what are some best practices for using QuickBooks online as a growing business? And you know, when should a business consider moving to a more robust or more? Do you know the nuance?
John Silverstein: Yeah. So the one thing I would say is that you need to try to get as much structure as possible in QuickBooks with numbering systems. Reviewing the chart of accounts. A lot of this structure and things and controls in QuickBooks tend to be manual in the process where you have to do manual reviews or have AI review it. Now you have that option. But you didn’t in the past be a business should consider moving to a more robust ERP when they’re getting into more complex workflows and complexities like consolidations and things. If you have multi-entity management QuickBooks, don’t really. It’s a separate entity and roll-ups are hard and complex. They’re getting a little bit better, but it doesn’t. It’s not made for that when you get into some of the currency and other things that you might face as a larger enterprise. Quickbooks aren’t made for that, or designed for that. So if you need more sophisticated reporting, you need to have more data too. It’s probably better to move on to a tool like Netsuite.
Emily: Got it. Got it. Thank you so much, John, for being here and talking to us about managing and scaling the chart of accounts in Quickbooks online. It was great having you. And it was a fruitful discussion. So thank you.
John Silverstein: No problem.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hey, everyone, this is Emily and I’m a digital transformation consultant with Hyperbots. And today we have the privilege of speaking with Dave Sackett, who is the VP of Finance at Percy Moon Technologies. So thank you so much for joining us today, Dave.
Dave Sackett: Yeah. Thank you, Emily. A pleasure to be here.
Emily: The topic we’d be discussing today is interrelationships and dependencies between GL codes and different ERP solutions. To start, Dave, can you please explain the importance of understanding the interrelationships and the dependencies between different GL codes in an organization’s financial reporting?
Dave Sackett: Yeah. It all starts with the chart of accounts and the way you structure it. You’ll have interrelationships between them. For example, revenue, COGS, expenses, assets, liabilities, and taxes. These are fundamental to accurate financial reporting and management. Revenue and COGS directly impact gross profit, while assets and liabilities are crucial for maintaining the balance sheet. Mismanagement or misclassification of any of these can lead to inaccurate financial reporting.
Emily: Got it. So, Dave, how do different ERP systems like SAP S/4HANA or Microsoft Dynamics 365 help maintain these interrelationships effectively?
Dave Sackett: ERP systems like SAP and Microsoft Dynamics are designed with a robust financial model that enables these relationships to be maintained accurately. SAP uses a universal journal that consolidates financial and managerial accounts into a single data source, making it easy to track dependencies and dimensions and advanced account structures to categorize and report financial data flexibly, ensuring that all interrelated GL accounts are consistently updated through the workflows and approval process.
Emily: Understood. Could you also please elaborate on these specific features in NetSuite and Sage Intacct that help maintain interdependencies between these GL codes?
Dave Sackett: Certainly. NetSuite provides a segmented chart of accounts and real-time reporting, which allows clear tracking of management interdependencies. Its revenue management module automates revenue recognition and ensures alignment with expenses, which is critical for accurate financial reporting. On the other hand, Sage Intacct is known for its dimensional chart of accounts, allowing for a more granular and flexible approach to managing GL codes. It supports automatic allocations and offers robust audit trails, ensuring that changes in GL codes are documented and those dependencies are maintained accurately by the accounting staff.
Emily: Understood. And, Dave, what about ERP solutions like QuickBooks, which are, you know, often used by small to medium-sized businesses? How do they handle these interrelationships?
Dave Sackett: With QuickBooks, it’s a very simple system, but there are essential tools to manage these interrelationships between GL codes. It uses linked accounts to automatically update related GL codes when transactions are recorded, ensuring the basic dependencies are still maintained. For example, when an invoice is generated, it automatically updates the revenue account and accounts receivable. This simplicity is beneficial for small businesses that don’t have complex financial needs and still require accuracy in their financial reporting.
Emily: Got it. So, talking a little bit about, you know, regulated environments such as companies in the government or contracting sector, how does ERP like Deltek Costpoint help maintain these interrelationships?
Dave Sackett: One of the specialties of Deltek Costpoint is that it’s specifically designed for government contractors and heavily regulated environments. It offers project-based accounting that links revenue, COGS, and expenses to specific projects and contracts, ensuring compliance with strict government regulations. Costpoint’s multi-entity and multi-currency management features help keep accurate interdependencies across different entities and countries, while its automated billing and revenue recognition ensures that revenue and related costs are properly matched and reported. Many government-type jobs are cost-plus, meaning that the government is going to have access to your cost records. So, you need to have it set up logically and structured for that audit and that review as part of your sale to the government.
Emily: Understood. Also, how important are third-party AI tools in maintaining these GL codes and the interrelationships for various ERPs?
Dave Sackett: The more complex your system, the more important it is for your ERP system to maintain GL code interrelationships. While ERPs like SAP, NetSuite, and Microsoft Dynamics come with built-in automation and analytic tools, third-party AI tools offer advanced capabilities, such as predictive analytics, anomaly detection, intelligent automation, and flux analysis. For example, AI tools can automatically identify patterns and anomalies in transactions that could affect multiple GL accounts, such as unusual spikes or unexpected expense increases, and suggest corrective actions. So that’s your flux analysis where it’s looking and saying, “Hey, this data doesn’t belong here. It’s not in the normal spec.” That’ll help users of that AI zero in and figure out why it’s doing that. Then, once they find that anomaly, they can train the bot to process it normally or still keep it as an exception, depending on the nature of the anomaly.
Emily: That’s amazing. So, Dave, can you provide an example of how an ERP system might handle a complex transaction that affects multiple GL codes?
Dave Sackett: Yeah, certainly. Let’s take an example of a sales transaction involving inventory in SAP. While the inventory is sold, the system automatically decreases the inventory asset account, increases the COGS expense, increases the revenue, and at the same time, calculates and records tax liability based on the tax rules that are set up in the system. All of these entries are done automatically, ensuring that every GL code involved in this transaction is accurate, and it’s being updated in real-time. Not only does it maintain interdependencies, but it also ensures compliance with accounting standards as it’s programmed specifically that way.
Emily: Got it. So finally, to wind things up, one last question, Dave. How can CFOs leverage these ERP systems to ensure continuous improvement in financial management and reporting?
Dave Sackett: CFOs can leverage ERP systems by utilizing advanced features like real-time reporting, automated workflows, and data analytics to continually monitor and improve financial performance. Regularly reviewing configurations, such as account structures, financial dimensions, and chart of accounts, ensures alignment with the company’s evolving needs. Additionally, investing in training and leveraging ERP vendor support can help maximize the use of these systems. By doing so, CFOs can ensure that financial management processes remain efficient, accurate, and compliant with regulations. Your ERP system is an investment, and you want to constantly check it to make sure it’s meeting your needs and your future needs. So, it’s not a one-time investment. It’s something that you want to have to grow with the company and continue to invest in that technology to give you better and better reporting.
Emily: Got it. Thank you so much, Dave, for sharing your insights on this complex yet essential topic. It was great having you, and this discussion was truly fruitful. So, thank you so much.
Dave Sackett: Yeah, thank you, Emily.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi everyone, this is Emily, a digital transformation consultant at Hyperbots, Inc. I’m happy to have Claudia Mejia, managing director at Ikigai Edge, with us again. Thank you, Claudia, for joining us.
Claudia Mejia: I am happy to be with you.
Emily: The topic today is a chart of accounts and GL coding in Microsoft Dynamics. For a small but growing business, what are some key considerations when setting up a chart of accounts in Microsoft Dynamics?
Claudia Mejia: One of the beauties of Microsoft Dynamics is its multidimensional capabilities. This allows you to set up different dimensions like departments, call centers, regions, eliminating the need to create multiple GL accounts for every dimension combination.
Emily: So, Claudia, how can businesses leverage Microsoft Dynamics features to maintain an effective chart of accounts as they scale up?
Claudia Mejia: When designing the chart of accounts, they should definitely define the dimensions that meet their needs. By using dimensions, you can match transactions to specific departments, product lines, geographical locations, or business units. You can also use advanced rules to automatically allocate expenses to specific multi-dimensions and GL accounts. Additionally, you can configure your account structure to define which financial dimensions go with each account.
Emily: Got it. That was insightful. What are some common mistakes businesses make when setting up their chart of accounts in Microsoft Dynamics, and how can they avoid them?
Claudia Mejia: Businesses coming from a small business system to Microsoft Dynamics tend to create GL accounts for every combination, which can be complex and time-consuming. To avoid this, ensure you design financial dimensions and use them properly. Additionally, leverage the chart of accounts designer tool to ensure you use the right combinations and avoid future issues when allocating expenses.
Emily: Understood. So, how can businesses create a flexible and scalable chart of account structure that maximizes Microsoft Dynamics capabilities?
Claudia Mejia: There are four functionalities to consider: defining dimensions, using account structures and their combinations, using rules to ensure expenses go to the right accounts, and using the chart of accounts designer to be proactive in how you use these combinations. Many small businesses don’t utilize these capabilities to their full potential. So, study the functionalities and establish a process for setting up these structures.
Emily: Got it. How can businesses leverage AI capabilities outside of Microsoft Dynamics to maintain a chart of accounts integrity?
Claudia Mejia: My preference would be an AI platform that connects via API to the system. This way, AI can read transactions, ensure they are allocated to the proper accounts, and perform predictive analytics to automate certain compliance tasks. Platforms like Hyperbots can do this in one solution. There are also other solutions for specific tasks, like AI for automatic account reconciliation or machine learning tools to identify duplicate entries. However, my favorite would be a solution that can automatically integrate into the system.
Emily: Got it. Got it. Can you provide an example of how Microsoft Dynamics financial dimensions can reduce complexity in the chart of accounts?
Claudia Mejia: Let’s say you want to track travel expenses for a department and a project. You can set up dimensions for department and project. Instead of creating GL combinations for marketing and project A or marketing and project B, you can simply create the dimensions and automate rules to ensure specific vendors and transactions go to the designated dimension and GL account.
Emily: Got it. Understood. One last question. How can AI facilitate migrating from Microsoft Dynamics to another ERP or consolidate multiple Dynamics instances?
Claudia Mejia: AI can read the context of GL account descriptions. If you have two Dynamics instances to consolidate, an AI tool can identify and map the corresponding GL accounts to avoid duplication and recommend how to do it. This, combined with a data migration framework in Microsoft Dynamics, can significantly improve efficiency by eliminating manual mapping. AI can reduce errors and ensure compliance, leading to sound financial reporting. Matching accounts properly is crucial.
Emily: Got it. Thank you so much, Claudia, for these insightful answers on managing and scaling the chart of accounts in Microsoft Dynamics. It was great having you, as always.
Claudia Mejia: Oh, thank you, Emily. Great talking to you.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily, and I’m a digital transformation consultant at Hyperbots. I’m really pleased to have Dave Sackett, the VP of finance at Persimmon Technologies, on the call with me. So thank you so much for joining us, Dave.
Dave Sackett: Yeah. Thanks, Emily.
Emily: So, Dave, today we’ll be discussing the chart of accounts in Sage Intacct. Let’s quickly dive into the first question. Could you please explain the key components of an effective GL coding scheme in Sage Intacct, and how exactly it benefits financial management?
Dave Sackett: Yep, what you want to do is set up your chart of accounts with logic, using a numerical scheme. One could be assets, two could be liabilities, four for revenue, and three for equity. Having that range, so that all your assets begin with one and all your liabilities begin with two, sets up a logical format for any chart of accounts. This is useful for report writers or using an AI model to categorize your data logically. When creating your chart of accounts, you should have gaps in there, so you’re not just adding one account to the next.
Dave Sackett: As you add new ones, plan for expansion. My suggestion would be to space out your accounts by at least five spaces across. So, whatever your number is—dot 005, dot 010, dot 015—if you need to place accounts in between, you can structure them without having to remap them with a report writer.
Emily: Got it. So apart from what you just mentioned, Dave, are there any other best practices you’d recommend when setting up or maintaining a chart of accounts in Sage Intacct?
Dave Sackett: Yes. You want to avoid miscellaneous as best as you can because people are always asking, “What’s in miscellaneous?” So if you can understand your business and code things to the right place in the chart of accounts, reporting becomes easier. But at the same time, you don’t want to go overboard and capture everything with a separate account.
Dave Sackett: One exception to that might be project accounting, where you want to track all the costs for a specific project. But for prepaid, for example, you don’t need one for every vendor. You want general accounts to cover prepaid marketing expenses or prepaid insurance expenses. Even if you have multiple policies or meetings, you’re still grouping similar assets into one category without cluttering your chart of accounts. You don’t want your chart of accounts to be 40 pages long like they used to be. Today, people prefer a cleaner, more succinct chart of accounts. If they want details, they can extract those from another report if the chart of accounts is set up properly.
Emily: Got it. Now, shifting gears to common mistakes or errors companies make when creating or managing a chart of accounts, what are some of those?
Dave Sackett: One common mistake is taking the existing account structure and trying to force it into a new system without considering future needs. Businesses change—new revenue models emerge. So anytime you have the opportunity to review your chart of accounts, don’t just copy what you did before. Take a new perspective and ask, “What’s my goal with this chart of accounts? What will future reports look like?”I like to think of the end goal and work backward. So, look at the future management reports you want, then figure out what you need to set up in the chart of accounts to achieve that final output. By doing this, you can avoid missing accounts or setting things up incorrectly.
Emily: Understood. So how would you suggest a company build a flexible and scalable chart of accounts to accommodate growth?
Dave Sackett: You need to structure it logically, so automation can assist you. For instance, using ChatGPT to look at examples of charts of accounts might reveal new things like leases or new accounting rules that require new accounts. For example, right-of-use asset or right-of-use liability accounts are now needed due to new accounting rules. Having an eye on both the present and future will help ensure your chart of accounts is flexible and scalable.
Emily: Understood. How can AI help maintain the integrity of the chart of accounts in Sage Intacct?
Dave Sackett: The benefit of AI is that it loves patterns and data. An ERP system structures things in a way that’s easy for AI to understand. It can analyze ranges, and you can train your model based on your logically-kept data. AI can easily find assets, liabilities, and other categories based on account ranges. If your chart of accounts is clean and logical, AI will have a much easier job, reducing errors in your modeling process.
Emily: Got it. Can you provide an example of how a fast-growing company might benefit from using AI to manage its chart of accounts in Sage?
Dave Sackett: AI can provide suggestions and perform flux analysis on the chart of accounts. It can analyze what accounts are missing, what accounts are not being used, or if any settings are wrong. AI can also flag anomalies in the chart of accounts. This can help the company diagnose issues in the account structure, making it easier for AI to assist in improving the system.
Emily: Got it. Is there any advice you’d like to give companies transitioning from a smaller accounting solution like QuickBooks to a more robust system like Sage?
Dave Sackett: Yes, as a company grows, transitioning to a more robust system is essential. Sage offers far more features and is more future-focused than QuickBooks. Using AI to assist in the transition can be a significant time saver. I’m personally transitioning from QuickBooks to Epicor, and similar principles apply.
Emily: To wrap things up, how often should a company review and update its chart of accounts, and what triggers these reviews?
Dave Sackett: Typically, reviews are triggered by changes in the business, such as new revenue models, different departments, or new reporting requirements. If your business changes direction, you need to ensure your chart of accounts is ready. Attend budget and forecast meetings to understand where the business is going, and prepare the chart of accounts accordingly. I recommend reviewing it at least once a year or as needed based on new developments.
Emily: That’s great advice. Thank you so much, Dave, for sharing your insights on managing the chart of accounts in Sage Intacct, leveraging AI, and planning for growth. Your expertise is invaluable for any company looking to optimize its financial management processes. Thank you for being here.
Dave Sackett: Yeah, thank you, Emily.
Moderated by Emily, Digital transformation consultant at Hyperbots
Emily: Hi, everyone. This is Emily. I’m a digital transformation consultant at Hyperbot Sync, and I’m pleased to have John, who is the VP of FP&A at Extreme Reach, on the call with me. So thank you so much for joining us today, John, really appreciate it.
John Silverstein: No problem. Thank you for having me.
Emily: Of course. So, John, the topic that we’d be discussing today is the impact of GL coding on financial reporting and auditing and I want to begin things by asking why GL coding is so important for financial reporting and auditing.
John Silverstein: Yeah, GL coding is critical for your financial reporting and audit, otherwise it becomes very difficult to report correctly, and you have to go to the transaction level, and then it defeats the purpose of the GLs. So it’s critical. It’s also extremely hard to audit something when it’s mixed, and you’re also generally not compliant if you’re not coding things properly in the financials. So it is critical both from a reporting and audit perspective and also for management to make proper decisions and everything to make sure that selling and marketing expenses are selling and marketing expenses and then it’s easily tracked. And you know who the owners are, and you know what it is.
Emily: Got it. So let me ask you this, how does a well-structured GL coding scheme enhance decision-making for the management?
John Silverstein: Yeah, if you well structure the GL coding, the decision-making, you have to align your GL coding to not only align from an accounting and GAAP standpoint, but also to make sure that you can make proper decisions on pricing or do proper ratios and things like that based on how you break your financials out. GL coding allows you to get segment reporting and figure out how profitable certain areas, products, or service lines are. If you don’t break it out and you don’t have the right granularity, it gets complicated to figure out the important information to make decisions in the business.
Emily: Got it. So just out of curiosity, John, can you provide an example of how GL coding affects compliance with regulatory and tax requirements?
John Silverstein: Yeah, GL coding is critical. If your transactions aren’t accurately classified with GAAP, it can affect your tax calculations, anything from sales tax to VAT to corporate income tax. You can end up overpaying or facing audit issues on the tax side as well. You must follow proper accounting, have the right GL coding, and minimize penalties for noncompliance. If VAT is consistently coded under a specific GL account, it becomes much easier to prepare accurate VAT returns and comply with local tax authorities.
Emily: Got it. So what are some of the common mistakes that organizations make with their GL coding schemes, and how can they be avoided?
John Silverstein: The biggest mistake is over-complication of the GL, where you start making GL codes for everything. But then there’s the opposite side, where you don’t break things out at all, and it’s all lump amounts, which makes decision-making hard. It’s critical to find a balance between detail and summary-level data. Make sure you have proper hierarchies so you can go more granular if needed and have a proper roll-up. There are also tools now that help with different ways of reporting from a management perspective that can help this as well.
Emily: Understood. Also, John, how can a GL coding scheme be designed to provide real-time or near-real-time financial reporting?
John Silverstein: If your GL coding is proper, then as transactions are happening in your GL, ERP, or even CRM, you can see that data at the right levels in near real-time. This allows you to see where you might end up from a financial standpoint and make decisions like ramping up production or slowing down sales based on live data. It’s important to align GL coding with ERP, CRM, and procurement systems to get live financial analysis instead of waiting for month-end close.
Emily: Got it. John, would you provide an example of how GL coding alignment with business strategy can improve performance monitoring?
John Silverstein: Sure. If a company aligns its GL coding schema with key performance indicators, it can monitor and optimize these metrics more effectively. For instance, a SaaS company might use specific GL codes for different components of customer acquisition costs and retention expenses, which gives insights into performance against goals. By doing this, you can generate financial reports focusing on metrics like customer acquisition costs, helping to make more strategic decisions in real time.
Emily: Makes sense. So a little bit about the audit process, John. How does a well-structured GL coding scheme simplify the audit process?
John Silverstein: A well-structured GL coding scheme simplifies the audit process by providing a clear and consistent trail of the transactions. This allows auditors to quickly trace entries, verify accuracy, and ensure compliance with accounting standards. For example, if an organization uses separate GL codes for office supplies at HQ and regional offices, auditors can efficiently sample and analyze expenses related to different locations. However, you need to be careful to ensure your schema isn’t overly complicated.
Emily: Got it. Just to wind things up, one last question, John. What would be your key recommendations for organizations looking to optimize their GL coding scheme?
John Silverstein: First, design a hierarchical structure that goes down to a detailed level but allows summarization. Use multi-dimensional analysis so you can get different insights like company roll-ups, cost centers, departments, and product lines without mixing everything into the GL. Balance granularity and simplicity, and align with the business strategy because strategies evolve. It’s important that GL coding reflects the current business direction. Integrate with other systems like ERP to avoid silos, and regularly review your coding schema to ensure it complies with current regulations and organizational structures.
Emily: Got it. Thank you so much, John, for sharing your insights on the critical role of GL coding in financial reporting, auditing, and decision-making. Your examples and recommendations will certainly help organizations better structure their GL coding schemes to achieve more actionable financial reports. Thank you so much for being here.
John Silverstein: No problem. Glad to be here.
Moderated by Prad, Financial Technology Consultant at Hyperbots
Prad: Hey, everyone welcome. I’m Prad from Hyperbots, a financial technology consultant. Welcome, Claudia. Thank you for joining us today to discuss the chart of accounts granularity. So let’s dive right in. Claudia, what practices should a company consider when deciding on the granularity of its chart of accounts?
Claudia Mejia: Hi, Prad, thank you for having me. Happy to be here. Well, let’s talk a little bit about when a company wants to initiate its financial reporting. They need to think very closely about the chart of accounts, right? Some of the factors they need to consider are the size, the complexity, the industry they’re in, and the level of detail they want for reporting and compliance purposes. Large organizations with different business units might want more granular charts, while smaller companies may need simpler COAs.
Prad: That’s a valuable insight. Can you give us some examples of how different levels of granularity might look in practice?
Claudia Mejia: Well, as I mentioned, large organizations may have different levels of detail in their chart of accounts. For example, they might not only want to see revenue and operating expenses by business unit but also have a very granular view. Instead of just marketing expenses, they may want to see specific categories like digital ads, so they can assess the ROI on those investments. In contrast, smaller companies might only need a single line for marketing.
Prad: Those were some great pointers. What are some of the challenges associated with having a very granular chart of accounts?
Claudia Mejia: There has to be a balance. Going too granular can create complexity for the accounting team. It requires more effort to ensure all lines are properly mapped, which increases the risk of data errors and makes financial reporting and compliance more difficult. So, it’s important not to overcomplicate the process.
Prad: On the other hand, what are the downsides of having a COA that isn’t granular enough?
Claudia Mejia: At the end of the day, we want the chart of accounts to provide insights that help us understand the business. If it’s not granular enough, you won’t have a clear picture of the cost drivers or be able to make informed decisions. It’s also important for compliance, especially when auditors review your financials.
Prad: Great point. Are there any industry standards or guidelines companies should follow when structuring their COA?
Claudia Mejia: It depends on the country and the industry. There are frameworks like GAAP, IFRS, and others that companies need to follow based on where they operate. Certain industries, like travel or manufacturing, may have specific standards, but ultimately, its essential to understand both operational and compliance needs when structuring the COA.
Prad: Can you shed some light on how AI and automation tools help manage the granularity of charts of accounts?
Claudia Mejia: AI can be incredibly useful in managing a chart of accounts. It can automatically categorize transactions, suggest adjustments, and predict trends. For example, if AI notices certain expenses aren’t being categorized properly, it might recommend adding a new chart of accounts. This reduces the manual effort required by the team and helps ensure accuracy.
Prad: As we near the end of the interview, what advice would you give to companies trying to strike the right balance between too much and too little granularity in their chart of accounts?
Claudia Mejia: I’d advise companies to start by understanding their operations and industry. The chart of accounts shouldn’t be created in isolation by finance alone it needs to be a cross-functional effort. Different departments might interpret categories differently, so everyone must be on the same page about what each category means and why it’s included. Leveraging AI for insights can also be a helpful tool in finding the right balance.
Prad: Finally, how can a well-structured chart of accounts contribute to a company’s overall financial health and strategic goals?
Claudia Mejia: A well-structured chart of accounts enables sound financial reporting and compliance. It helps with budgeting, forecasting, and strategic planning, allowing the company to make informed decisions that drive the business forward. It also ensures smooth audits and contributes to robust financial management, which is crucial for achieving long-term goals.
Prad: Thank you so much, Claudia, for sharing your insights on this critical topic. Finding the right balance in COA granularity can greatly impact an organization’s financial effectiveness and strategic decision-making. Thank you once again.
Claudia Mejia: Thank you, Prad, for having me.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily, and I’m a digital transformation consultant at Hyperbots. I’m very pleased to have Rick on the call with me, who has been a CFO for a long time and has been into finance across different business segments, industries, and revenue streams. So happy to have you on the call with us, Rick.
Rick Suri: Thank you for having me. It’s a pleasure to be here.
Emily: Of course. So, Rick, the topic we’d be discussing today is liabilities in the chart of accounts.
Emily: And just to get things started. The 1st question that I have for you is, what role do liabilities play in a company’s chart of accounts, and why is it important to structure them correctly?
Rick Suri: So that’s a very important question, because liabilities are, you know, sums of money or obligations to 3rd parties. They represent an essential part of the business and have a lot of significance for managing the business as well as reporting on its financial health, so correctly structuring the liabilities is a critical topic. And not just for accurately reporting the financial status of the business, but also for internal reporting. It can have implications on lender covenants, and a lot of other financial parameters.
Emily: Got it, understood. So, Rick, would you be able to provide some practical examples of how liabilities differ across various industries, such as manufacturing, retail, or SaaS?
Rick Suri: That’s another great question. So liabilities across different industries would mirror the industry itself. For example, if you’re a manufacturer, you would have accounts payable, and obligations or money owed for raw material purchases and services. For retail, there would be similar obligations for goods that have been bought. In addition, they would be lease liability, and in a SaaS industry, you would have liabilities for deferred revenue, those kinds of expenses, and maybe in certain cases, liabilities for other expenses.
Emily: Got it. So what are the best practices for structuring liabilities in the chart of accounts to ensure clarity and compliance?
Rick Suri: Some of the best practices to ensure clarity and compliance are paying attention to classification. You have long-term liabilities and short-term liabilities, or current liabilities. Within certain long-term liabilities, you would have an obligation to identify the current part of that liability. You would require more specificity like each liability. Some of them may have to be reevaluated, so consistency is important. Just consistency between the way different liabilities are treated across the entity, especially if it’s a multinational or multi-unit entity. This will make consolidation easier. There should also be transparency, meaning liabilities need to be broken out with some degree of specificity, so you’re not clubbing different kinds of liabilities, which makes reporting and analysis easier. Lastly, regular reviews to ensure that the current designation is accurate.
Emily: Got it, understood. What are some of the common mistakes or errors that accountants often make when structuring liabilities in the chart of accounts?
Rick Suri: Common mistakes that I’ve seen include improper classification, the risk of over-aggregation, and not disclosing significant liabilities separately as required under GAAP. You could also encounter redundant accounts, which you obviously want to avoid. Inconsistent terminology is another issue. And perhaps the most significant mistake is omitting certain liabilities.
Emily: Makes sense. So, Rick, how can AI help in improving the accuracy and management of liabilities within the chart of accounts?
Rick Suri: AI, as I like to call it, augmented intelligence, is a powerful tool. It’s rule-based, utilizes machine learning, and offers great benefits. One of the biggest advantages is automatic classification—it can automatically classify liabilities based on examples. It can also help detect anomalies, like unusual patterns in accounts payable. Standardization is another benefit, and AI can drive consistency across the business. The biggest value is predictive analysis, where AI can assist with forecasting, cash flow management, and other financial predictions. Finally, it enables dynamic updates, automatically suggesting changes when certain factors shift.
Emily: That’s really amazing. Can you share a specific example of how AI has been used effectively to manage liabilities in a particular industry?
Rick Suri: I can think of a couple of industries, but let’s take healthcare, for instance. AI has been used to automate the classification of liabilities, like between accounts payable and accrued expenses. It’s used to analyze historical data, detect vendor anomalies, and flag unusual spikes in payments. This has helped healthcare providers better manage their business and flag potential errors or risks.
Emily: Got it. How can companies ensure that their liability accounts remain flexible and adaptable to changes in the business environment?
Rick Suri: The most important thing is continual review. Companies should regularly assess their chart of accounts to ensure they’re not missing any new liabilities and that everything is properly categorized. For example, companies need to break out the current portion of long-term liabilities when appropriate. This process needs to be ongoing to stay aligned with changes in the business environment.
Emily: And just to wind things up, Rick, one final question. What advice would you give to CFOs and finance teams about managing liabilities in the chart of accounts?
Rick Suri: My advice would be to focus on providing consistency, clarity, and accuracy in the reporting of liabilities. Finance teams should embrace automation and AI, which can help with reviewing liabilities regularly and ensuring accurate financial reporting. Leveraging technology will be essential to staying ahead and maintaining high standards.
Emily: Got it. Thank you so much, Rick, for these valuable insights on managing liabilities in the chart of accounts. Having you was truly amazing, and it was a very fruitful discussion. Thank you!
Rick Suri: Thank you for having me. It was a pleasure sharing my thoughts on this topic.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone! This is Emily, and I’m a digital transformation consultant at Hyperbots. I’m happy to have Claudia on the call with me. Who is the managing director at Ikigai. It’s great having you on Claudia.
Claudia Mejia: Hi, Emily, thank you for having me.
Emily: Claudia. The topic we’d be discussing today is redundant and duplicate gl codes in the chart of accounts without, you know, wasting everybody’s time. I’ll just dive right into the 1st question, which is, why do redundant and duplicate gl codes exist in a company’s chart of accounts?
Claudia Mejia: Yeah. Well, I will say that one of the major reasons is the lack of standardization in the creation of the GL Codes. Many companies don’t have a standardized process, or this is a very important process. So some departments might just create codes on their own without a centralized team, a process that directs them how to create them. Another reason why we have redundant, I will say, is mergers and acquisitions. You have 2 different companies that they merged. Now you have 2 charts of accounts, and you need to have a very good process to map the accounts and make sure that you don’t have redundancy when you combine these companies.
Emily: Got it so, Claudia, would you be able to provide some examples of common redundant, or duplicate gl codes that you have encountered?
Claudia Mejia: So some examples that are probably the most common are office supplies. You have, for example, office supplies administrative and calls printing supplies stationary. So a lot of these descriptions are the same. But they’re created multiple times by different departments. And then you have the entries, putting in different accounts. That creates a lot of complexity for teams in the FP. And A when they’re doing reporting, because now we have several accounts that mean the same. Another example is travel expenses, right? If you break it out now too much, then you’re probably not very accurate with the actual expenses. For example, entertainment. You have domestic traveling and international traveling. So sometimes it’s just that simplicity is the best. You can have one line. But if you want to go down to have subcategories. You can be very mindful of what those subcategories should be.
Emily: All right. So moving ahead, Claudia, what are the best practices to avoid creating redundant or duplicate GL codes?
Claudia Mejia: I will say, implementing a chart of account governance framework, basically standardizes the process to who? What is the centralized team that is putting together the codes? Who’s doing it when they’re doing it? how they’re doing it, making sure that they’re out. It’s either quarterly, semi semi-annual to make sure that there are no redundancies with the codes. A centralized team is important, and a system can have the governance of these codes. Make sure also naming conventions. Right? It’s important to make sure that there is a standard, not only for the numbers but also for the descriptions. So now we just don’t have these long descriptions that are not easy to follow and manage from a reporting perspective.
Emily: Got it. So, bringing AI into the equation quickly, how can AI help in identifying and eliminating duplicate or redundant GL codes of the chart of accounts?
Claudia Mejia: Well, AI can understand the descriptions, understand partners, and also make recommendations. So you can use large language models, and to make sure that the chart of accounts is analyzed. And by doing that you can determine which charts of accounts are duplicates and which ones can be consolidated. For example, clustering reclassification. So AI can tell you which accounts are very similar and can be consolidated. For example, marketing, digital marketing, and other types of marketing can be consolidated into one also it can give you semantic similarity detections. So for those descriptions that are very similar can say, Hey, these 2 accounts are very similar you might be able to consolidate. But again, AI provides recommendations, and is very important for that team to follow up. If that recommendation makes sense.
Emily: Got it so just to utilize your expertise, Claudia, how would you recommend implementing an AI solution for a company that is looking to reduce redundancy in its chart of accounts?
Claudia Mejia: Well, you can have AI system solutions that connect with your ERPs and they can have that audit done automatically. Another way to do it, making sure that you follow the policies of the companies is using the large language models like Chatgpt Gemini, but making sure that when you’re loading that data into the system, it follows the company’s privacy for the data and all the policies. But by doing that you can, as a model, basically say, can you analyze my charts of accounts? Tell me which accounts are duplicates. Tell me which ones I can consolidate. You have to be very specific and clear about the prompts. But these models are very good at analyzing this type of data, and they will provide a recommendation that tells you which one you can combine and which ones you can eliminate. So by doing that, you can have that information and move it through a governance team that can decide if these recommendations make sense, and which was which charge of account which goes, can be eliminated, and consolidated and have an audit on that recommendation and make sure that once you have a sign-off from the leaders and the users of the information, then basically, you communicate the changes and make sure that you monitor this information often. Joseph accomplished something that is not seen as an important process, but it is a very important process because it triggers all the financial reporting from there. So if you have a bad setup in your charge of accounts, then your financial reporting can become very complex, and it creates manual efforts from the IFP team and all the reporting teams afterward.
Emily: Got it. Got it. Thank you so much, Claudia, for these insightful answers. It’s clear that you know, with the right tools and best practices. Companies can significantly reduce redundancies and maintain a clean and efficient chart of accounts. So thank you so much for speaking about it. It was great having you.
Claudia Mejia: No, thank you, Emily, as usual.