Advice on GL Account Number Structure?

Yahoo Archive
1
This structure seems to abuse the purpose of GL accounts.



Divisions capture costs for large chunks of your business (operating
units, etc.) where you might want to compare between them.



Departments capture costs for functional areas, typically based on job
duties.



And of course charts capture costs for the expense type.



Our structure has a single chart for ACCOUNTS PAYABLE - TRADE, and a
single AP account per company.



We capture departmental and project purchasing costs using the GL
Account and Reference Codes on the PO Release - we can use that to
"charge" the expense to a particular department and optionally a
reference code which we use as a project designator. We can then roll
up those costs in reports.



I'm not clear on what business value stuffing vendors into your COA
would give you other than a lot of overhead.



-bws



--

Brian W. Spolarich ~ Manager, Information Services ~ Advanced Photonix /
Picometrix

bspolarich@... ~ 734-864-5618 ~
www.advancedphotonix.com



From: vantage@yahoogroups.com [mailto:vantage@yahoogroups.com] On Behalf
Of eltaria.foong
Sent: Wednesday, February 25, 2009 10:18 PM
To: vantage@yahoogroups.com
Subject: [Vantage] Re: Advice on GL Account Number Structure?



Here's two samples of our AP.

Our GL format is such, DIV-DEPT-ACCOUNT

Sample of our AP GL account

1st AP
XX-VENDOR1-1000

2nd AP
XX-VENDOR2-1000

And so on until our 800th vendor

This is the same format used in our AR as well.

Therefore, as you can see we'll be adding a new Department for each
supplier/customer for our AP account. But by using the Dept in such a
way, aren't we loosing the main reason why department exists in the
first place? (To group up accounts under a common department)

Assuming we can't simplify the AP list, aren't it correct for it to be

1st AP
XX-GENERAL-1000

2nd AP
XX-GENERAL-1010

3rd AP
XX-GENERAL-1020

In such a way, if we later decide to separate the APs along
departmental lines, I can have

XX-IT-1000
XX-FINANCE-1000

XX-IT-1010
XX-PRODUCTION-1010

Summary.
Am I correct in saying our GL Departments is totally abused in our COA
the way that it is now?





[Non-text portions of this message have been removed]
2
Hi, I'd like to share our GL Account Number structure with the group,
and hopefully, be able to get some advice on it. Because, I have a
feeling that our gl department is a bit out of control.

We're using Div-Dept-Account format

Division would be our company name, and for the most part it doesn't
do much, there's only 1 division for each company.

Departments, now this is where I'm a bit confused on our department usage.

We create a department for everything!

We have about 800 Departments for our Accounts Payables
A couple hundreds more for our Accounts Receivables.
And another couple hundreds more for each one of our projects
(Finished Goods)

My question is when do we make use of the Account numbers, and when do
we make use of departments?

For example, we have 800 Departments + 1 Chart of Accounts for AP
The other way that we can do it is to have 1 Department + 800 Chart of
Accounts for AP

Both gives us the total number of 800 GLs, however, which is
'theoretically' the better or cleaner way to do it?

Thanks a lot~
3
Further more, we have some cases where we got the same reference in
both the department and chart.

We have a department for 'Amount due to director'
and we got a chart for 'Amount due to director' as well.

In such a case, the Amount Due to Director department is redundant
isn't it? And could've been replaced with a GENERAL department?

Thanks again~
4
Wow! That is a lot of accounts. If you have good use for multiple accounts or departments, then that is fine. There will always be a tradeoff between having a lot of information available in a structure with a lot of breakouts versus having ease of maintenance in a simple structure. If all those accounts and departments each have only small amounts of activity every month, then you have too many. An account that only gets hit with $100 every six months should probably be rolled into another account. On the other hand, an account that gets hit with 20% of your total expenses each month might be a candidate to get split into smaller accounts.

Regarding departments versus accounts. I have always thought of a department as a level where you could point to one person who was responsible for everything in that department. It should correspond to an actual department or functional group within the company. Accounts are used to classify types of transactions or balances.

In my company, we have an accounting and finance department. A larger company might break that out into accounting, treasury, financial analysis, fixed assets, accounts receivable, accounts payable, and the like. We also have one department that is used for items that cross the entire company, like cash, accounts receivable, and accounts payable. 800 departments may be about right for a multi-billion dollar international conglomerate. If you are not that big, you likely have more departments than you need. Especially if you have 800 departments in accounts payable alone, that could be too many. If you have 800 people or groups of people, each managing a well defined portion of accounts payable, then that is about right. Even in a multinational company, I have a hard time seeing value in more than, say, 100 different accounts payable accounts or departments. I can conceive of the need, I just doubt it happens. If it does happen, the company has probably outgrown Vantage by a long way.

In your situation, I cannot see any value in creating a separate department for every project. There are better ways to segregate the transactions for a project. I could change my opinion if you only do a half dozen projects every year, though even then, I think it would be better handled some other way.

Since you have already gone down this path, you have a very large task ahead of you if you want to change. You will not be able to delete accounts or departments that already have some activity. You can deactivate accounts, but they will be with you until you change systems. If you want to simplify, I would suggest taking it one step at a time. For example, this month could be the one where you consolidate the accounts payable accounts/departments. Next month could be accounts receivable, and so forth. Going forward, be very stingy with issuing new accounts or departments. When someone comes to me to ask for a new account or department, we have a long and serious discussion where we first explore other options for getting the information he needs.

HTH

Thom Rose
Controller
Electric Mirror LLC
HOTEL LUXURY

"The World Leader in Back-lit Mirrors & Mirror TV Technology"

T 425 776-4946
F 425 491-8200
A 11831 Beverly Park Rd, Bldg D, Everett, WA 98204 USA
www.electricmirror.com<http://www.electricmirror.com>

From: vantage@yahoogroups.com [mailto:vantage@yahoogroups.com] On Behalf Of eltaria.foong
Sent: Wednesday, February 25, 2009 2:08 AM
To: vantage@yahoogroups.com
Subject: [Vantage] Advice on GL Account Number Structure?


Hi, I'd like to share our GL Account Number structure with the group,
and hopefully, be able to get some advice on it. Because, I have a
feeling that our gl department is a bit out of control.

We're using Div-Dept-Account format

Division would be our company name, and for the most part it doesn't
do much, there's only 1 division for each company.

Departments, now this is where I'm a bit confused on our department usage.

We create a department for everything!

We have about 800 Departments for our Accounts Payables
A couple hundreds more for our Accounts Receivables.
And another couple hundreds more for each one of our projects
(Finished Goods)

My question is when do we make use of the Account numbers, and when do
we make use of departments?

For example, we have 800 Departments + 1 Chart of Accounts for AP
The other way that we can do it is to have 1 Department + 800 Chart of
Accounts for AP

Both gives us the total number of 800 GLs, however, which is
'theoretically' the better or cleaner way to do it?

Thanks a lot~



[Non-text portions of this message have been removed]
5
Just out of curiosity...are your departments actually related to a
person or vendor?

Because what little knowledge I have about accounting, that seems way
too high. But that is just my opinion since I do not know your
organization.



M. Manasa Reddy
manasa@...
P: 630-806-2000
F: 630-806-2001


________________________________

From: vantage@yahoogroups.com [mailto:vantage@yahoogroups.com] On Behalf
Of eltaria.foong
Sent: Wednesday, February 25, 2009 4:30 AM
To: vantage@yahoogroups.com
Subject: [Vantage] Re: Advice on GL Account Number Structure?



Further more, we have some cases where we got the same reference in
both the department and chart.

We have a department for 'Amount due to director'
and we got a chart for 'Amount due to director' as well.

In such a case, the Amount Due to Director department is redundant
isn't it? And could've been replaced with a GENERAL department?

Thanks again~






[Non-text portions of this message have been removed]
6
> We have about 800 Departments for our Accounts Payables
> A couple hundreds more for our Accounts Receivables.
> And another couple hundreds more for each one of our projects
> (Finished Goods)
>
> My question is when do we make use of the Account numbers, and when do
> we make use of departments?
>
> For example, we have 800 Departments + 1 Chart of Accounts for AP
> The other way that we can do it is to have 1 Department + 800 Chart of
> Accounts for AP
>
> Both gives us the total number of 800 GLs, however, which is
> 'theoretically' the better or cleaner way to do it?

It sounds like someone's putting way too much detail into the G/L.

FWIW, don't tell them that in Epicor 9 that you get to name the account
sections (e.g., div, depart, chart, subchart, country, county, etc.) and
that you can have up to 20 segments per account number.

Mark W.
7
Have you looked at the GL setup in the Training database as a model.

--- In vantage@yahoogroups.com, "eltaria.foong" <eltaria.foong@...>
wrote:
>
> Hi, I'd like to share our GL Account Number structure with the
group,
> and hopefully, be able to get some advice on it. Because, I have a
> feeling that our gl department is a bit out of control.
>
> We're using Div-Dept-Account format
>
> Division would be our company name, and for the most part it doesn't
> do much, there's only 1 division for each company.
>
> Departments, now this is where I'm a bit confused on our department
usage.
>
> We create a department for everything!
>
> We have about 800 Departments for our Accounts Payables
> A couple hundreds more for our Accounts Receivables.
> And another couple hundreds more for each one of our projects
> (Finished Goods)
>
> My question is when do we make use of the Account numbers, and when
do
> we make use of departments?
>
> For example, we have 800 Departments + 1 Chart of Accounts for AP
> The other way that we can do it is to have 1 Department + 800 Chart
of
> Accounts for AP
>
> Both gives us the total number of 800 GLs, however, which is
> 'theoretically' the better or cleaner way to do it?
>
> Thanks a lot~
>
8
Have you looked at the GL Reference Codes? It might be better to make
use of them instead of creating departments for everything.



Linda



From: vantage@yahoogroups.com [mailto:vantage@yahoogroups.com] On Behalf
Of eltaria.foong
Sent: Wednesday, February 25, 2009 5:08 AM
To: vantage@yahoogroups.com
Subject: [Vantage] Advice on GL Account Number Structure?



Hi, I'd like to share our GL Account Number structure with the group,
and hopefully, be able to get some advice on it. Because, I have a
feeling that our gl department is a bit out of control.

We're using Div-Dept-Account format

Division would be our company name, and for the most part it doesn't
do much, there's only 1 division for each company.

Departments, now this is where I'm a bit confused on our department
usage.

We create a department for everything!

We have about 800 Departments for our Accounts Payables
A couple hundreds more for our Accounts Receivables.
And another couple hundreds more for each one of our projects
(Finished Goods)

My question is when do we make use of the Account numbers, and when do
we make use of departments?

For example, we have 800 Departments + 1 Chart of Accounts for AP
The other way that we can do it is to have 1 Department + 800 Chart of
Accounts for AP

Both gives us the total number of 800 GLs, however, which is
'theoretically' the better or cleaner way to do it?

Thanks a lot~





[Non-text portions of this message have been removed]
9
Thanks for all the replies!


Manasa
"Just out of curiosity...are your departments actually related to a

person or vendor?"

In the case of our accounts payables, yes each department is a unique
vendor.


Thomas,
"If all those accounts and

departments each have only small amounts of activity every month, then
you have too many. An account that only gets hit with $100 every six
months should probably be rolled into another account."

Good idea, I'll check out the amounts for each of the accounts :)

Dave
"Have you looked at the GL setup in the Training database as a model"

Thanks, I'm looking at it for reference now.

Linda
"Have you looked at the GL Reference Codes?"

I haven't looked at it before, searched the group for "Account
Reference", found a post on Dec 26 2007 by Patty Buechler which sounds
great!!

Thanks a lot to everybody for your kind assistance in pointing me to
the right direction.
10
Here's two samples of our AP.

Our GL format is such, DIV-DEPT-ACCOUNT

Sample of our AP GL account

1st AP
XX-VENDOR1-1000

2nd AP
XX-VENDOR2-1000

And so on until our 800th vendor

This is the same format used in our AR as well.

Therefore, as you can see we'll be adding a new Department for each
supplier/customer for our AP account. But by using the Dept in such a
way, aren't we loosing the main reason why department exists in the
first place? (To group up accounts under a common department)

Assuming we can't simplify the AP list, aren't it correct for it to be

1st AP
XX-GENERAL-1000

2nd AP
XX-GENERAL-1010

3rd AP
XX-GENERAL-1020

In such a way, if we later decide to separate the APs along
departmental lines, I can have

XX-IT-1000
XX-FINANCE-1000

XX-IT-1010
XX-PRODUCTION-1010


Summary.
Am I correct in saying our GL Departments is totally abused in our COA
the way that it is now?
11
There is no reason I can think of to have a separate department for each vendor. Reports are readily available to breakout balances or activity by supplier. There is no need to have that on your GL. I can think of a few special cases where a separate AP account or department is appropriate for a few vendors. If the accounts payable is to a related party, that may justify a separate AP account/department. Perhaps one or two major suppliers might justify their own separate accounts/departments, but not every vendor. At a previous company, a winery, we had a separate account for related party accounts payable, and a separate account for grape purchases. Each of those type of payables were special cases. I currently have just one accounts payable account, and I use that for all my vendors.

Thom Rose
Controller
Electric Mirror LLC
HOTEL LUXURY

"The World Leader in Back-lit Mirrors & Mirror TV Technology"

T 425 776-4946
F 425 491-8200
A 11831 Beverly Park Rd, Bldg D, Everett, WA 98204 USA
www.electricmirror.com<http://www.electricmirror.com>

Note: The information contained in the e-mail, including any attachments, is legally privileged and confidential. If you are not the intended recipient you are hereby notified that any reading, use or dissemination of this message is strictly prohibited. If you have received this message in error, please immediately notify us by telephone at 425-776-4946 and delete this message from your system. Even though this e-mail and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free, and no responsibility is accepted by Electric Mirror LLC for any loss or damage arising in any way from its use


From: vantage@yahoogroups.com [mailto:vantage@yahoogroups.com] On Behalf Of eltaria.foong
Sent: Wednesday, February 25, 2009 7:18 PM
To: vantage@yahoogroups.com
Subject: [Vantage] Re: Advice on GL Account Number Structure?


Here's two samples of our AP.

Our GL format is such, DIV-DEPT-ACCOUNT

Sample of our AP GL account

1st AP
XX-VENDOR1-1000

2nd AP
XX-VENDOR2-1000

And so on until our 800th vendor

This is the same format used in our AR as well.

Therefore, as you can see we'll be adding a new Department for each
supplier/customer for our AP account. But by using the Dept in such a
way, aren't we loosing the main reason why department exists in the
first place? (To group up accounts under a common department)

Assuming we can't simplify the AP list, aren't it correct for it to be

1st AP
XX-GENERAL-1000

2nd AP
XX-GENERAL-1010

3rd AP
XX-GENERAL-1020

In such a way, if we later decide to separate the APs along
departmental lines, I can have

XX-IT-1000
XX-FINANCE-1000

XX-IT-1010
XX-PRODUCTION-1010

Summary.
Am I correct in saying our GL Departments is totally abused in our COA
the way that it is now?



[Non-text portions of this message have been removed]