Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily and I’m a digital transformation consultant with hyperbots. I’m really pleased to have Jon Naseath on the call with me, who is the CFO and COO at various small to midsize businesses and is currently working with Cantu Capital. So it’s really great to have you, Jon.
Jon Naseath: Pleasure.
Emily: So the topic we’d be discussing today Jon is balancing granularity in the Chart of Accounts, and I’d want to kick things off by asking, why? Is finding the right balance in the granularity of a Chart of Accounts important for any organization?
Jon Naseath: The trick is to figure out what’s gonna be applicable for your business. So you’re trying to look at the business units. And where do you want to look at the full balance sheet and P&L across the entire business? If the Chart of Accounts gets too granular. It can overcomplicate reporting, increase the workload, and make it harder for stakeholders to understand. What is that? P&L. Or what is that balance sheet impact for that piece of the business in retail, for example, you might not want to take every minor office expense separately and break them down. But where do you want to roll it up into things like rent utilities, and marketing to understand the cost drivers effectively?
Emily: Got it, so great example of retail? Can you provide a few more examples of what might constitute too much or too little granularity levels in different industries?
Jon Naseath: Sure. Usually, we get too much. Granularity is where different people have been submitting requests of what they want to report on. The most extreme example I saw is when I was at the company, and they had built out their products into the Chart of Accounts, and that was fine when they had like 5 products when they built that out into like 10 products, and then 20. And they ended up with like 50 products trying to figure out how to tag all that revenue and all that expenses into each individual product. The offering was just way too granular. Another example could be the healthcare sector, where there’s medical equipment versus diagnostic equipment, just kind of granularity and one of the key things is when you create confusion around which code to tag things into. If some, if a certain expense could be tagged to multiple codes that just becomes complicated. So making it so it’s mutually exclusive, comprehensively exhaustive. So it’s unique to figure out what codes go to is really the key.
Emily: Got it. Great advice. So, Jon, how can AI help determine the optimal level of granularity needed in a company’s Chart of Accounts?
Jon Naseath: Well, the real way that I think AI could help would be by looking back at what’s happened historically and figuring out what is that common level of granularity across all your expenses, and then come back with a recommended singular level. So no single part is. and the revenue is broken, broken out in too much detail where the expenses are at a similar higher level. If you wanna AI, could really help standardize a constant detail level across the whole business.
Emily: Understood, so just out of curiosity. How can a company change the granularity of its Chart of Accounts without affecting previously posted data?
Jon Naseath: We definitely don’t want to go back and re-stay or redo things historically the main way that I’ve seen this is oftentimes they’ll take a point in time, call it at the year-end user ideally, and then report from a new perspective. Going forward and figuring out what is old and new is key. But then creating that mapping that figures out, where you take your old accounts? And how those old ones gonna map to the new ones is critical. I think that’s the main piece.
Emily: Understood, also, are there any industry, standards, or auditor requirements that help determine the right level of Chart of Accounts, granularity?
Jon Naseath: There aren’t really any consistent universes. Universal standards like historical across industries. It really depends on what business model you have and how you’re doing your business model. Different companies, especially publicly reported companies, will align their management reporting and their investor reporting so that investors can see things consistently across industries or they’ll try to try to and then even in that example, though if a company does something unique, then they’ll claim while they’re why they’re unique and special. But for the Chart of Accounts, it really is. Whatever that company and their products and their expenses are. There are opportunities to certainly consider how other companies are doing it and aligning with them in general. But your business is unique. And so you’re gonna build out different chart account requirements for your own business.
Emily: Got it, who should be involved in signing off the Chart of Accounts within a company, and why?
Jon Naseath: Yeah. This is a lesson learned for me in my life. I was involved. I was driving a transformation project for a very large company, and some of the issues we were talking about happened. And I was kind of a program managing this ERP large quote to cash transformation. We pulled together everybody, every stakeholder. So we have. I remember a large meeting where the CFO. The controller internal auditors representative from external auditors were involved and they certainly should be. I was driving the overall transformation as program manager, and I was also very focused on all of the data for all of the things that impacted finance and let’s just say that I spoke up too often. My, my, I was pushing for detail. I wanted to make sure that everything was considered in everything could be represented from this one Chart of Accounts but I didn’t take into account the extra effort it would require, or I just wasn’t aware of the extra effort it required to tag everything to all of these dimensions and complexity that I wanted to build into the Chart of Accounts. People were kind during the discussion, but I realized that I was not a rep. I was. I didn’t own it, and I wasn’t the primary user of it.
Jon Naseath: So really, those are the people that you need to be letting guide how they’re, how they’re going to use it because the Controller primarily owns the Chart of Accounts. The CFO is the primary recipient of the outputs from it and then even the internal auditors have requirements and different people. But a program manager with good intentions doesn’t necessarily own it, and should just sit back and listen and make sure things are consistent, but not add additional requirements.
Emily: Got it, and any other common mistakes that companies make when defining the granularity of the Chart of Accounts that you know, and how exactly? Can they actually avoid it?
Jon Naseath: Just really looking at it. I use the term blowing out your Chart of Accounts, meaning there are just too many details. It. It complicates the reporting. It makes it so that their decision-making is hard although on the flip side, you can go the other direction because I’ve seen it. Where, if you start with, say the generic Chart of Accounts that comes out of something like QuickBooks that might not be detailed enough, and then you need to add in different accounts to be able to manage your business. And so what ends up happening is you have your Chart of Accounts. But then, say, FP&A. Or other teams have their own reporting hierarchies that they use, and you need. You want your Chart of Accounts to be the most useful product or the most useful tool for covering the majority of your business.
Emily: got it and just to summarize everything we spoke about. Jon one last question is, how can AI assist in regularly reviewing and maintaining the integrity of the Chart of Accounts?
Jon Naseath: Yeah, great question specifically for the Chart of Accounts. It’s think of it as a living document or a living hierarchy. There’s its master data. It is the master data for how you’re going to manage the finances of your business and so if that master data isn’t complete, then you’re going to have challenges. So one of the ways that AI can help is it can automate kind of that consistent review and make recommendations for how it could be structured, and then also make recommendations for which accounts or which transactions get coded, to which account so just kind of helping you manage that master document. Manage that, master. Data can be very helpful for that. Ai can also detect certain expense categories that are rarely used for similar accounts, and make sure they’re mapped together, or if something is too detailed, it could help roll it up into a different account.
Emily A: Got it. Got it. Thank you so much, Jon, for sharing your insights on achieving the right balance in the Chart of Accounts. The role of AI in this process, and the best practices for maintaining a well-structured Chart of Accounts. This discussion provided valuable guidance for any company looking to optimize their financial reporting. So thank you so much.
Jon Naseath: My pleasure.
Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily, and I’m a digital transformation consultant with Hyperbots. I’m really pleased to have Dave Sackett on the call with me, who is the VP of finance at Persimmon Technologies. So thank you so much for joining us today, Dave.
Dave Sackett: Yeah. Thanks. Emily.
Emily: So, Dave, the topic we’ll be discussing is Deltech CostPoint, GL coding, compliance, and the role of AI tools. So to kick things off. The 1st thing that I’d want to ask you is, if can you explain the GL coding scheme used in Deltech cost point, and how exactly it is structured to support businesses and high compliance industries. Let’s say, the government contracting, aerospace, defense, and nonprofits.
Dave Sackett: Sure. Yeah. The GL coding scheme and Delta cost point. It’s structured to support complex accounting through multiple segments, including you’ve got account organization project costs cost pool cost elements. For example, the account segment can capture the nature of the transaction, whether it’s an expense, an asset, or revenue. You know where it is on the GL, and there’s a project that can help track your revenue spending and your costing, which is very critical in government reporting where a lot of those contracts are cost-plus. So you need to have good records for auditing. You should be able to calculate indirect rates. you know, needed for government contract requirements like Far and DCAa guidelines.
Emily: Understood. So, Dave, what are some common errors or mistakes that organizations make when applying the GL coding scheme and cost point? And what impact? Can these mistakes really have happened?
Dave Sackett: Yeah, there are common errors, including incorrect segment coding, trying to get too detailed in your GL misclassifying transactions, and the wrong projects. Wrong organizations have different people. Interpret your accounts in a different way, so that you’ve got a mix of where your costs really land. You kind of want to all capture them in the same spot. you know, tracking labor expenses, you know. Maybe it’s coded against direct costs instead of indirect. So basically, you know, really locking down your system so that only direct can add to direct labor. Only indirect can add to indirect labor. So you can put controls in to make sure that your data is consistent with data entry, and you definitely don’t want to clutter the chart of accounts with too much granularity that will complicate financial reporting, and be more open to these kinds of mistakes.
Emily: Understood. Also, Dave, how do cost points, and coding schemes specifically benefit organizations operating in the different sectors that I just mentioned, like government aerospace defense and nonprofit sectors, If you can provide some examples that would be great.
Dave Sackett: Yeah, I’ll take defense as an example. cost points, coding scheme. It’s designed to handle detailed project accounting and cost allocations that are required. So, for instance, cost Point can help track down to the project level and manage multiple cost pools for calculating indirect rates. It can support rigorous compliance requirements and segregate direct and indirect costs. It helps with grant-based funding by tracking costs against restricted funds and producing reports for regulatory agencies.
Emily: Understood. Also, Dave, what features in cost point, help organizations achieve higher compliance, especially, you know, regarding regulatory standards like Far or DCAa that you just mentioned?
Dave Sackett: Okay. One example is automated compliance checks which validate, cost allocations and can ensure adherence to government regulations. There are audit trails and documentation which is another critical feature that allows transactions to be traced back to their source documents which are critical for the audits that are going to be required. Also, time and expense tracking. Having it all in cost. Point makes you know you’re not using multiple systems. You’re doing it all in one system, and you can get accurate labor costing which is required for the Service Contract Act. Sca and Cost Point also provide indirect rate management to calculate and manage indirect costs in line with Far and DCAa standards which is vital for government contractors, especially defense contractors.
Emily: Got it. so, Dave, can you describe some specific compliance? Benefits of using cost points for an organization working? Let’s say, Federal contracts.
Dave Sackett: Sure. Yeah, for an organization working on Federal contracts. Cost points, compliance, and features ensure adherence to strict government regulations. So one example is automated. Compliance checks that I talked about it can flag improper, cost allocations before they become an issue in an audit. It can track the segregation of duties and have evidence that prevents a single user from controlling multiple transaction phases. minimizing audit fraud and risk that could be picked up in an audit additionally, cost points, and capabilities to generate required reports such as incurred cost submissions, help demonstrate compliance with Far and DCAa requirements, reducing the risk of penalties and disallowed costs.
Emily: Understood. How can external AI tools enhance the integrity and functionality of the GL coding scheme and cost point?
Dave Sackett: Yeah. Great question external AI tools provide several enhancements such as data, validation and error, detection and to automate and review data entries and flag inconsistencies or errors. In real time these create anomalies that AI can set aside and through predictive analytics can help identify these unusual transactions from typical patterns which is crucial for compliance. And also, AI, okay, yeah, go ahead. You got it.
Emily: So diving deeper into AI. Dave, can you give examples of how AI tools have been effectively used to maintain the integrity of cost points and charts of accounts?
Dave Sackett: Yes, AI. Tools have been used to automate reconciliations between different account segments, comparing entities with projects and organization codes to identify mismatches or potential errors. It can flag the users for inconsistencies in the data. and they also support continuous learning by adapting to new compliance rules ensuring that cost points and charts of accounts remain up to date with the latest standards. So, for example, AI tools can detect, if certain cost categories are consistently misclassified and prompt a review, to prevent a repeated error. So, for example. if an AI system is doing something and it’s detected as an anomaly, and then it knows well it went from this account and got reclassed over to that account that AI Bot can learn and be taught to say, Okay, yeah. The reason why it’s being changed is for this. So when you see that now do this, so it’s very trainable in terms of making sure that not only does it alert you to problems, but it can then help prevent problems in the future.
Emily: Got it. And just to summarize the discussion that we are having, Dave, what future opportunities do you see for the integration of AI tools with cost points to further enhance compliance and financial accuracy?
Dave Sackett: Yeah, this is the part I like. The best future opportunities include deeper integration of machine learning algorithms or rules to predict compliance risks based on historical data patterns and to suggest corrective actions proactively. And you’ve got forecasting that AI will be able to do. And AI can facilitate real-time audits by continuously monitoring transactions against regulatory requirements, reducing the need for manual audits. So as you’re doing transactions, AI can almost be that auditor for you saying, hey, yeah, everything’s in compliance. Everything’s in compliance. Wait a second. This one looks odd and alert, the user that they could be out of compliance. So it’s having that assistance, and especially where you’ve got AI natural language processing, you’ll have almost like a chat Bot helping you as an assistant in the future to help translate complex regulations which you can turn into action directly within cost point, ensuring that all financial operations align with compliance standards.
Emily: That’s amazing. Thank you so much, Dave, for sharing your insights on Delta cost points, GL coding, compliance, capabilities, and the role of AI tools and enhancing these processes. Your expertise provides valuable guidance for organizations aiming to optimize their financial operations, while you know, maintaining strict regulatory compliance. 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 and I’m a digital transformation consultant at hyperbots Inc. Today I’m very happy to have John on the call with me, who is the VP of FP&A, at XR Extreme Reach. So thank you so much, John, for joining us.
John Silverstein: No problem.
Emily: The topic we’d be discussing today is GL codes and debit or credit entries for vendor invoices, and I’d want to kick it off by asking the 1st question, which is John, can you explain what happens in the general ledger when a vendor invoice with multiple items is posted?
John Silverstein: Yeah, when a vendor invoice has multiple items, the GL, looks at those items based on their classification and where they should go from both a tax accounting account basis, department even, and those types of things. So it will go in and classify everything correctly based on the item code. So it’s not by the invoice or customer. That’s 1 thing to note because some people get confused when you look at one account of items, some items on the same invoice might go to tax lines versus office furniture versus computer equipment. So one example is that, like you get a. you have 2 items, office furniture, and computer equipment. One for the office furniture is $10,000. Your computer’s equipment is $5,000. Each of these items would be subject to different tax rates potentially and item, one would have a sales tax rate of 5%. The county tax sales of 2% item, 2 might have 6% and one and a half percent. The total invoice amount before the tax is $15,000. Then you will get office furniture. The item code will go to office furniture and to the account code for office furniture, and if it’s over your limits and everything, then it will capitalize that versus hitting your expense directly. And you’ll have that $10,000 with the $500 of sales, tax, and county tax 200 for a total of 700 hit the tax lines and then your computer equipment of 5,000, and the 6% 375 for 375 of taxes. So that’s it, will Calc directly based on those item codes. So it’s important to get those right.
Emily: Got it understood. So, John, what are the specific debit and credit entries that need to be recorded in order for you to know such, let me just do that again. So, John, what debit and credit entries need to be recorded in the GL for such an invoice?
John Silverstein: Yeah, for such an invoice. You need to debit entries. You’re gonna have furniture and fixtures because you’re creating those assets for $10,000, which would be a numbered code ideally, too, with maybe 1 5 0 0 as the account number and it will record that office furniture as an asset for the computer equipment. It’s over $5,000. So if that’s your threshold and things, too, it will record and purchase the computer and debit the computer equipment as an asset as well. Sales tax payable. We’ll debit $800 and the county sales tax debit 275 as well on the payable side, and then your credit entries would be the accounts payable for 16,075, which includes the full amount, plus the taxes.
Emily: Got it understood. So, John, why are these specific GL codes chosen? And what do they represent in the context of financial reporting?
John Silverstein: Yeah. So these GL codes are chosen based on the nature of the transaction. So because the item is furniture and fixtures, you’re going to hit that GL code 1,500, which represents the capital expenditures for office furniture. So by debiting this account, we can increase the value of our fixed assets on the balance sheet, and you would set up the schedule, too, for amortization as well. That we’ll talk about in another episode, I guess, or in conversation. But computer equipment assets would be 1 5, 1 0 similar to above. This code represents the capital expenditure for computer equipment. It debits and increases that fixed asset as well. So you can start amortizing, appropriately based on what that code amortization is. So if it’s 1 year, 3 years, 5 years, those types of things you can. It will also pick, based on the code that you put State sales, tax payable. These codes represent the liabilities for sales tax owed to the State and county tax authorities respectively. So you’ll debit these accounts temporarily reflecting the recognition of the tax liability until the payment is made and accounts payable. Same sort of thing, a liability account representing the total amount. the choice of these gl codes. It ensures proper classification and accurate financial reporting of these items.
Emily: Understood, understood, and just out of curiosity. How would the entries differ if this invoice was, let’s say, for operational expenses instead of capital items?
John Silverstein: Yeah. The main difference is that it would go directly to your expense. So it is generally a 6,200, 6,300, or whatever your numbering system is for the P. And L. Accounts. So you would hit office supplies and hit the $10,000 as an expense, and then the IT services. Would be $5,000. As well. So you would. It’s 2 different accounts, and your sales tax, though, would remain the same, and you would have to have the office supplies expense and its services, and then the State sales, tax payables, and county sales tax payables.
Emily: Got it. So, John, what challenges do organizations face when posting invoices with multiple items and varying tax rates? And how can they address these challenges?
John Silverstein: Yeah. So to address these challenges and to make sure that when you’re posting the invoices with multiple items of varying tax rates is making sure that you have matching tax rates. So different items may have different tax rates depending on the jurisdiction. It may even be if it’s a resale item, too. You have to. There are other rules in there, too, that you might be exempt from, so it can check those types of things as well. It also, if you’re paying the taxes versus itself tax versus, you’re paying the tax directly to the vendor, those are different coatings as well, so you have to make sure that you get all those correct. So complexity and matching tax rates are critical and it’s complex, particularly in the US. It’s by jurisdiction. Multiple GL codes also complicate the data entry, since it’s not just, that you don’t just purchase one item at a time in one invoice. That’s many items. So those have all different rules depending on it can be services and potentially items that you’re doing. And then they have different tax rates to address these challenges, too. You need to. You can use AI and machine learning to classify these invoice items, apply the correct rates, and make sure that it does capitalize when it’s supposed to be capitalized versus going to the expense rate which would also affect your income tax basis. So integrate with the tax engines for those jurisdictions. You can also have the validation checks. and that will ensure that you have accurate financials.
Emily: I’m doing one last question to summarize everything. John. Now that you mentioned AI and Ml, right, how can technology, particularly AI help in improving the accuracy and efficiency of gl entries for vendor invoices?
John Silverstein: AI can significantly enhance the accuracy of the Geo entries because you can have that data extracted from the invoice and make sure that you’re capturing. It has both items, codes, items, descriptions, all those things that can really check and make sure that you’re actively getting it through the Ocr. You can also use natural language processing techniques to reduce any manual data entry errors. You can also do smart classifications based on the AI models that can classify each item of the invoice to correct gl codes, so you can have it. Go through and look at the historical data plus predefined rules, and you can ensure that those items correctly classify the tax calculations with compliance. AI can automate the application of the correct tax rates and make sure that you’re applying those correctly as well. You also have detection of anomalies, that is, if there are unusual patterns or discrepancies in the invoice, AI can pick those up and alert the finance team for an extra review that can obviously enhance the quality of our financials and make sure that we’re accurately stating everything and get it can also speed up our time.
Emily: got it. Thank you so much. John, for being here with us and talking to us about GL codes and debit or credit entries for vendor invoices. It was really great having you, and the discussion was really insightful. So thank you so much.
John Silverstein: Great great to be here.
Moderated by Emily, Digital transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily and I’m a digital transformation consultant with Hyperbots. Really pleased to have Rick on the call with me, who has been into finance his entire life and has been a CFO to various organizations across different industries and revenue streams. So really great to have you, Rick.
Rick Suri: Thank you for having me.
Emily: So, Rick, the topic that we’d be discussing today is GL coding schemes and chart of accounts in NetSuite, and I’d want to kick things off by asking, how would you describe the GL coding scheme in NetSuite, and what makes it unique compared to other platforms?
Rick Suri: That’s a really good question. NetSuite’s GL coding scheme is designed for flexibility and scalability. It includes a unique combination of account numbers, account types, and segments, such as departments, classes, locations, and some custom fields, allowing businesses to tailor the chart of accounts to their specific needs. Unlike other platforms, NetSuite supports multi-subsidiary and multi-currency transactions, which is particularly valuable for companies operating in multiple markets. This multidimensional coding scheme allows for detailed financial tracking and reporting, which sets it apart from simpler systems like QuickBooks.
Emily: So, Rick, what are some common errors or mistakes that organizations tend to make when setting up or managing their GL coding in NetSuite?
Rick Suri: Organizations sometimes make mistakes such as creating overly granular accounts, which can complicate reporting and analysis. Another issue is inconsistent use of segments, like departments or location codes, leading to incomplete financial data. Misclassification of account types, such as recording an expense as an asset, can also cause significant discrepancies in financial statements. Additionally, duplicate or incorrect handling of multi-currency transactions are frequent errors that can affect the integrity of financial data.
Emily: Got it. So how does NetSuite’s GL coding scheme differ from QuickBooks? And why is NetSuite often preferred by mid-sized companies?
Rick Suri: As I mentioned before, NetSuite offers advanced features such as multi-subsidiary management, multi-currency support, and detailed segment tracking, which QuickBooks lacks. NetSuite provides a higher degree of customization, allowing businesses to create a GL structure tailored to their specific needs. Additionally, it offers robust consolidation capabilities and integrates seamlessly with other business functions like CRM, inventory, and supply chain management. Mid-sized companies, especially those with multi-subsidiary and multinational transactions, prefer NetSuite because it can scale with their growth, manage complex accounting requirements, and provide deeper insights into their financial performance.
Emily: Got it. So, Rick, can you explain how NetSuite supports the creation of a flexible and scalable chart of accounts for growing businesses?
Rick Suri: Yes, of course. NetSuite’s flexibility comes from its support for multi-subsidiary and multi-book accounting, allowing companies to manage multiple entities under a single platform. It offers segmented accounting, which enables tracking of financial data across various dimensions, such as departments or locations. Features like dynamic allocation, automated journal entries, and advanced consolidation make it easier to adapt to changing needs without constantly restructuring the chart of accounts. Additionally, NetSuite allows for customization through custom fields and scripting, ensuring that businesses can maintain a flexible and scalable chart of accounts as they grow.
Emily: Understood. What specific features in NetSuite help businesses maintain accurate and compliant financial records, especially in a multi-entity environment?
Rick Suri: As I mentioned earlier, NetSuite provides multi-book accounting, allowing businesses to maintain separate books for different entities or subsidiaries while having the flexibility to consolidate them for reporting purposes. It also offers advanced intercompany transaction management, eliminating the risk of double counting or errors in consolidation. The automated journal entry feature ensures recurring transactions are accurately recorded, reducing the chance of manual errors. Furthermore, real-time reporting and customizable dashboards provide visibility into financial performance, helping maintain compliance and accuracy by using the general ledger as a source of truth.
Emily: So, Rick, in what ways can external AI tools enhance the management of a NetSuite-based chart of accounts?
Rick Suri: AI tools can provide several benefits to managing a NetSuite-based chart of accounts. They can automate data validation and cleansing processes, reducing the risk of errors such as duplicate accounts or misclassification. AI tools can also detect anomalies and unusual patterns in financial data, which could indicate fraud or noncompliance. Moreover, they can automate the reconciliation process, match transactions across various accounts, and provide continuous monitoring and alerts for potential issues. By using AI tools, businesses can maintain the integrity of their chart of accounts more effectively and make data-driven decisions.
Emily: Got it. And talking about the benefits a little bit, Rick, what are some of the key benefits of NetSuite’s multi-dimensional segmentation approach for mid-sized companies?
Rick Suri: NetSuite’s multidimensional segmentation allows companies to track financial data across several customizable dimensions, such as departments, classes, locations, and even custom fields. This approach enables mid-sized companies to gain granular insights into their operations, improve financial analysis, and make more informed decisions. It also supports complex reporting requirements and provides the flexibility to adapt to changing business needs. As companies grow, their multi-dimensional approach ensures that they can continue to segment and analyze their data in ways that drive strategic growth.
Emily: Got it. Just one last question, Rick, to round things up. How do NetSuite’s integration capabilities with other business functions contribute to its preference among mid-sized companies?
Rick Suri: NetSuite integrates seamlessly across various business functions like CRM, inventory management, e-commerce, and supply chain management. This integration allows for real-time data sharing across departments, reducing data silos and ensuring a unified source of truth. For mid-sized companies, this means they can streamline operations, enhance collaboration, and improve decision-making. The integrated platform also supports scalability, as businesses can add new functionalities without needing to switch systems, making NetSuite a preferred choice for companies aiming for growth.
Emily: Got it. Thank you so much, Rick, for these insightful answers. Your expertise helps clarify why NetSuite is a popular choice for mid-sized businesses and how external tools can further enhance its functionality. It’s been a pleasure speaking with you today.
Rick Suri: Thank you for having me. I’m glad to share insights on this interesting topic.
Moderated by Kate, Financial Technology Consultant at Hyperbots
Kate: Hi, Jon, thank you so much for joining us today. So let’s just dive right into the questions. So coming to the 1st question, why are segments like company code cost center code project code and important in a chart?
Jon Naseath: Absolutely It really comes down to if you want to be able to see and if you’re thinking about your general ledger, then you have the. You can look at things as to how the company looks. How does this entity look? What’s this? Does cost center profitability as an example? And then you mentioned Project Code and Gl codes and others. I would. I would argue that company code. Certainly, you need to be able to see what is the full P and L. View, or at least what is the financials for that company. Also for the cost center. You know what’s the cost and expenses specifically to that department, or mark such as marketing, or it to help drive performance project code. It depends. It has, I would argue, it should be a large project, like a major initiative that you’re doing or a major development effort where you do need to have that project full P. And L. Because it’s a lot of work to maintain and to integrate that into your system? And then just the gl is what ties all those together across assets and liabilities and enables that full view across the different, all the business units that you’re talking about.
Kate: Okay, that’s understandable. Moving on to the second question, what are some best practices for naming conventions for these segments? And why standardization? Important.
Jon Naseath: Yeah, there, there’s just I’ll call them standard ways, like, as you said, default ways of being consistent is the main thing and making it. So that when somebody’s looking at these codes, they understand and kind of interpret what you’re talking about. So with company code as an example.Understanding as part of that you think about what is the syntax within the code. So it might be that there’s a country at the beginning like us, dot 0 0 1 could be. The country could be a company code for a US Entity. A cost center could be, you know you might put some letters that represent an example like Mkt. 0 0, 1 could be marketing. What do you want it to be able to be something, so that a human can interpret what these codes are doing in a sequential order of, you know, revenue and different departments can also be helpful? And then, when you’re doing a project code as an example, something that it’s again, I would suggest a major initiative you’re doing. But you want to be clear that these are the costs that relate to it for a given year. You might say this is Project Code Xyz, or whatever. But then put 24 at the end, like the year. Something represents what year it’s for so that you’re looking at your costs for a given period. It’s very clear how to distinguish. Even if it’s a major initiative program. You want to know that these are the costs for one year versus the next year in that example. I’ve used that before. But just consistency is the key thing and you know it should be easy enough to interpret how those codes are gonna map to. If you think about your management reporting aspects of summary of management reporting, and what periods they go to, and things like that.
Kate: Okay, yeah, I agree with you. So moving on, what are some common mistakes accountants make with these segments, and how can they be avoided?
Jon Naseath: Okay one example is they people are putting the wrong transaction to the wrong code. So misclassification of codes.And then if you do that. You know the thing that accountants hate is having to do reclassifications, because, you know, if you get an auditor coming in and say, Oh, that was done wrong, and then you have to later reclassify something. Whether that was because it was a mistake or because the business changed, and maybe the timing of how things were coded wasn’t accurate in time but having to do reclassifications is always painful and then redoing, and oftentimes if you’re in a big public company, you’ve reported numbers. You just don’t want to do that. It can create big problems for investors with redundant codes. So seeing that there’s actually something you can have. I like to call it blowing out your chart of accounts where you just have too many codes and reality is the accountant who’s trying to map things to the code. There’s no difference between A B or C from their point of view, or maybe the transaction would apply to all of them, so they’ll usually just pick one and then you end up having 2 other codes in that example that just aren’t used. So that’s if you’ve blown out your P. And L your chart accounts too much, then it’s kind of a waste of time. Also inconsistent coding. So if you have, say that I was describing some of the syntax before. if you use 3 letters, and then a number, or if you use 3 numbers a dash, then a number. You know, you just want to be consistent. So it’s clean and that’s hard over time. Things change. But doing the classic example in this is it? I’ve seen companies. I’ve been involved in companies where previously they had put all of their products into the chart of accounts into the GL and that might be good intent at the beginning when you only have a few products. But then they have, like dozens and dozens of products. Every time the product wants to reshuffle how they’re presenting their products you would need to update your chart of accounts to map to that. So I’ve seen problems from that before because you don’t remove the historical accounts. You just add new ones to it, if it’s problematic.
Kate: Couldn’t agree more, moving forward. How can organizations maintain the integrity of these segments in their ERP systems?
Jon Naseath: Yeah, it really comes down to data governance so you need to have consistency and integrity of the chart of account segments. I think one of the best ways of doing that is, having an owner, you know, having role-based access controls, controlling, who has authority to update that oftentimes that comes down to the job of the controller and that’s kind of one of the main jobs. The controller by definition is to control which accounts are going to be called what things, and try to maintain some consistency even though the business is changing and enabled. So you can do historical reporting on the new views but just define the standardized naming conventions doing regular audits and making sure that things are consistently showing up. I mentioned in a previous discussion about the budget to actual reconciliation. So if you’re doing a budget or a forecast, and how those map to your chart of accounts that will flag if your forecast, where you’re gonna look at the business is consistent with your I’ll call it historical way of looking at the business in your chart of accounts. So just doing those budget versus actual reconciliations is helpful and then automating validation rules. So that as you’re entering entries into the system they’re coded correctly and there are different reconciliations, and controls you can put in place in most ERPs.
Kate: That was really insightful. I totally agree with you. Moving forward with the next question, what role does technology play in managing these segments effectively?
Jon Naseath: Yeah, I describe the main role as helping flag or raise inconsistencies for you to be able to see them, and either preventative controls or detective controls right? It’s gonna prevent you from coding it incorrectly upfront or if you’re on the FP and a side, and you’re seeing inconsistencies, it can flag things for you that you can then work with the accountant to clean up so automated detection. It may help generate the codes automatically based on whatever the transaction was, it can suggest different codes for you, for the Gl or the call center. you know, just there’s a lot of times of manual errors that can happen, and it can help prevent those as you’re coding things. Data integrity. Again, the ERP system looks for duplicates, looking for missing values, or something that was hard coded wrong, and then dashboards again. It’s always funny to me, cause the situation is when you have, like a senior executive that really wants to see the real-time accounting dashboards of what’s happening but with accounting you’re always in the process of trying to catch up and you know, book the transactions at one of the companies I’m working with right now. The accountant got pulled into something else, and he’s 3 months behind in booking the accounting. It’s a smaller company, but the executive wants to see his dashboards, and the numbers are just wildly off, so if management’s making decisions based on these historical numbers that are wildly off that’s problematic. So technology can help keep you consistent and help book things in real-time as they’re happening. So that you’re just kind of managing by exception as opposed to having to book everything manually.
Kate: Understood. So we have almost reached the end of our interview. Can you provide examples of how errors in segment coding can impact financial reporting?
Jon Naseath: You know well, not only I’ll call it not only impact the financial reporting, but impact your whole business like if you’re in a public company, and you’re coding something to the wrong place. Then you report those numbers. Investors make bad decisions, and usually, then lawsuits can happen because they’re like, oh, that was intentionally misstated and we made investment decisions based on whatever. So I remember just kind of this tight schedule of closing the books, and then rushing to get all the books closed, and then at the month end, accounting financial preparation done. So you can produce investor analyst reports for a public company and there was this army of like 30 or 40 investor analysts just waiting to dive in and find any anomalies in what you just reported and I remember just once or twice. I don’t remember if it actually happened, but I remember the fear was always like, if we miss something, then they’re gonna call you on it because it’s wrong. You have to say, oh, that was an error, that’s just bad for the team. So we avoided making errors but you end up with misstated financial statements. You have compliance issues that auditors would find and an inaccurate profitability analysis, like, what is the profit? What is the forecast? What’s your guidance going to be for the next quarter that you’re gonna give? All those are off? If your core things have been coded incorrectly.
Kate: So the last question for today, what steps would you recommend to an organization looking to improve its COA segment management?
Jon Naseath: Yeah, the 1st thing that I’d call out is verifying the historical accuracy and knowing what numbers you can rely on, I’ve been in a situation where a company hadn’t had proper controls around their accounting historically when I was brought in, and we tried, and previous to my joining the owners had made different business decisions based on well, they frankly they bought the company that I was then brought in to help them manage, based on these inaccurate accounting numbers. And so then, when I came in and figured out what actually was happening, and why they didn’t have enough cash at the end of each month. It was because of these basic accounting errors which I’ll say could have been avoided. So you know, just implementing standard close process standard controls in place naming conventions around what codes need to be what? And making sure that they’re coded correctly and used consistently. Leveraging technology, I’d call out specifically AI nowadays a lot of the ERP systems, you know, when I started my career, different ERP systems were different Oracle sap like QuickBooks.They all kind of competed on feature functionality but nowadays they’re also similar in their core functionality. So there are other tools that can help leverage. What’s there get your clothes faster, better, cheaper, and less costly. Regular training, making sure that the team, and specifically, I’ll call it business rules, make sure that your different team has the same business rules that they’re following when they’re coding things. Usually, I’ll have like. if there’s an accounts payable clerk, there’s a 1 page, something that they use as guidance to know how to code, what, and where. As an example and then putting in place the appropriate review mechanisms. As I mentioned before. if you’re in a big public company and your numbers are going to. Investors are making investor decisions in real-time. You have a series of reviews and a series of controls in place literally, like number by number, checking and automated, checking, manual checking, and having a binder for each close to show what you checked and that you signed off on everything. Just those are standard things when you’re doing accounting closes for big public companies. But I’d argue what I spent a lot of my subsequent career doing is implementing those similar sorts of controls for smaller companies that aren’t big in public because someday they might be, and regardless of whether you’re public or you have investors looking at your numbers every day you, should you? You want to have clean numbers so that your management can make good decisions and grow the business. So consistency completeness, accuracy, all your classic accounting things that auditors will look for later. Make sure those controls are in place. Don’t rely on just your auditors telling you when you should fix things, get them clean so that your management can make good decisions from the start.
Kate: So much, Jon. That was a really insightful conversation. Thank you so much for your insights. It was really nice to have you today with us here and thanks a lot. Have a nice day.
Jon Naseath: You, too, have a great day. Thanks.
Moderated by Emily, Digital transformation Consultant at Hyperbots
Emily: Hi, everyone. This is Emily, and I am a digital transformation consultant with Hyperbots. Really pleased to have Shaun on the call with us, he is with North Poke Southern, and he is the SOC Compliance Manager. Thank you so much for joining us today, Shaun.
Shaun Walker: Thanks so much for having me. Excited to be here.
Emily: So, Shaun, the topic we’d be discussing today is the cost of goods sold heads in the chart of accounts. To begin with, the first question I wanted to ask you is, why is it essential to have a well-structured COGS in the chart of accounts, and what impact does it have on financial reporting and decision-making?
Shaun Walker: Absolutely, I’d say it’s vital because it directly affects the accuracy of gross margin calculations, which are crucial for understanding a company’s profitability. A clear cost of goods sold structure also enhances transparency and consistency in financial reporting, which is crucial for internal analysis, compliance, and most importantly, investor confidence.
Emily: Got it. So, Shaun, how should COGS or cost of goods sold be structured differently across different industries, such as manufacturing, retail, SaaS, construction, and healthcare? Could you provide some examples?
Shaun Walker: Yeah. The main point is that it needs to reflect the specific cost drivers. For example, in manufacturing, the cost of goods sold includes raw materials, direct labor, and manufacturing overhead, while retail focuses on inventory purchases, inbound freight, and shrinkage costs. Construction would cover more direct material costs, labor, subcontractor costs, and equipment rental. Healthcare would relate more to medical supplies, direct labor, and depreciation of equipment. Each industry has unique elements that need to be captured to have the most accurate insights.
Emily: Got it. Thank you so much for sharing that information, Shaun. Moving toward best practices, what are some of the best practices for structuring the cost of goods sold in the chart of accounts to ensure they are truly meaningful and actionable?
Shaun Walker: The main thing is to align with the specific operations of the business. We want to maintain a level of granularity that provides actionable insights and ensures consistency across periods for accurate trend analysis.
Emily: Understood. Any common mistakes you’ve seen companies make when structuring the cost of goods sold in their chart of accounts? And how can these be avoided?
Shaun Walker: Sure. Common mistakes include overgeneralizing the cost of goods sold categories, which obscures key cost details, hinders analysis, and misclassified expenses, such as including indirect costs under the cost of goods sold. Another error is failing to update the cost of goods sold in response to changes in business operations, like a new product or service. To avoid these mistakes, companies should regularly review their cost of goods sold structure, ensure clear guidelines for categorization, and involve cross-functional teams in designing the chart of accounts.
Emily: Understood. Also, Shaun, how can AI help in managing the cost of goods sold structure more effectively within the chart of accounts? Can you share some specific examples?
Shaun Walker: AI can automate the categorization of expenses and analyze transaction patterns, which reduces manual errors and ensures consistency. For example, AI can use natural language processing to interpret invoice details and automatically assign costs to the appropriate subcategories, improving both granularity and accuracy.
Emily: Got it. Also, can you elaborate on how AI-driven predictive cost management works and its benefits for businesses?
Shaun Walker: Predictive cost management uses historical data, market trends, and real-time operational information to provide a forecast for the future. It helps businesses anticipate potential cost overruns or savings opportunities and enables proactive management decisions, such as adjusting production schedules, renegotiating supplier contracts, or optimizing resource allocation.
Emily: Got it. Just out of curiosity, Shaun, what role does AI play in enhancing the granularity of the cost of goods sold data, and why is this granularity important?
Shaun Walker: AI enhances granularity by breaking down the cost of goods sold into specific subcategories and cost elements. This granularity is important because it helps identify inefficiencies, informs pricing strategies, and supports more accurate financial forecasting and analysis.
Emily: Understood. To summarize the conversation, Shaun, one last question: looking ahead, how do you see the role of AI evolving in the context of managing the cost of goods sold and overall financial management?
Shaun Walker: I see it expanding and growing significantly. As AI systems become more sophisticated, they’ll provide even more accurate and real-time insights and analysis. It can automate complex processes, support predictive analytics, and help businesses stay ahead of potential issues. Ultimately, AI will not only improve the efficiency of financial operations but also enable more agile and informed decision-making.
Emily: Got it. Thank you so much for sharing these valuable insights, Shaun. It’s clear that having a well-structured cost of goods sold in the chart of accounts is crucial, and AI is proving to be a powerful tool in optimizing this area. Thank you so much.
Shaun Walker: Absolutely.
Moderated by Kate, Financial Technology Consultant at Hyperbots
Kate: First of all, thank you so much for joining us today. Let’s dive right into budgets and their integration with the chart of accounts. Can you start by explaining how budgets are typically managed in organizations? Are they usually a part of the ERP’s chart of accounts, or are they maintained separately?
Jon Naseath: Well, they’re typically separate. When you think of accounting, that’s looking backward, and the budget is looking forward. But then there are also budgets, and then there are forecasts, which are often different types of forecasts. When we’re talking about a budget, that’s usually over the current year or the next year in a monthly forecast. So, you could argue that it does align with the chart of accounts and could be managed similarly. I have managed a chart of accounts-level budgets and updated the budgets into the ERP system. But it’s not usually required. In some cases, it’s done by a separate tool outside of finance, more FP&A tools as opposed to the ERP main accounting system.
Kate: Moving on to the next question, how do revenue and cost heads from the COA in the ERP map to budget breakdowns in these FP&A groups?
Jon Naseath: Yep. So usually, you take your chart of accounts with all the different detailed accounts and levels. The end output is management reporting, which helps management make the right business decisions and see the impact of changes. Even though the chart of accounts might be more detailed, finance often has to translate and map accounts over to specific revenue or cost groupings for budget and management accounting.
Kate: Understood. What level of granularity is generally required for budgeting in industries like manufacturing?
Jon Naseath: The level of granularity depends on the decisions managers need to make for the business’s performance. In some cases, you may have too much detail, where it doesn’t impact decision-making, and in other cases, there’s not enough detail, which blinds you to what’s happening. Think of the chart of accounts as your general ledger for slicing and dicing data across the business, while sub-ledgers like accounts payable may provide specific insights without needing detail in the chart of accounts.
Kate: Moving forward, could you provide examples of budget heads for industries like construction, healthcare, clinical trials, and automobile dealerships?
Jon Naseath: At a summary level, if you think about what’s in a P&L, they’re similar. You have revenue, direct costs, and gross margin, but there are different standards for items like gross sales, net revenue, cost of goods sold, or cost of revenue in SaaS models. Below the cost of goods, you might also consider things like marketing or acquisition costs. Industry standards affect terminology but are mainly to make it easier for analysts to understand your business in comparison to others.
Kate: How can AI help maintain the integrity of budget heads or the structure within the COA?
Jon Naseath: Businesses are always changing, and it’s often challenging to update the chart of accounts in the ERP system. AI can assist by helping map the chart of accounts to forecasts, allowing real-time translation of legacy items into a forecast view. This ensures management can get the necessary budget or management reporting even as business lines or revenue streams evolve.
Kate: What are the common challenges organizations face in integrating budgets with the COA and ERP systems?
Jon Naseath: Consistency and accuracy are big challenges. When I was a director for an S&P 500 company, I produced budgets and rolled-up forecasts. Reconciliations between monthly management reporting and forecasted numbers were challenging, often because accounting might tag costs differently from the FP&A team’s forecast assumptions. This can cause discrepancies, requiring communication and sometimes manual updates.
Kate: That was really insightful. So, we have reached the end of our interview. This is the last question. How can organizations leverage AI to overcome these challenges?
Jon Naseath: I’ve seen multiple examples where AI manages real-time mapping. With some guidance on mapping, AI can respond to management’s needs by pulling relevant data and accounts to provide consistent views. Additionally, AI can flag changes, helping ensure accuracy in budgets and management reporting. AI is increasingly capable of assisting the companies I work with in maintaining this consistency.
Kate: That was very insightful. Thank you so much, Jon, for those insights. It’s clear that AI has a big role to play in the future of financial management. Thank you for joining us today.
Jon Naseath: Pleasure! Thank you.
Kate: Thank you.
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: 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.
