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.