Data and information are key in today’s world and governments are becoming more sophisticated in how they collect and combine financial data. Tax authorities are asking for more visibility of company information - increasingly requiring it in real time - and leadership teams are calling for more meaningful insights from the data and information available to them.
For organisations which disclose their group financial results externally, there has always been significant pressure to get things right, and the burden of this has never been felt so acutely. But with limited functionality of their various accounting systems, this has tended to be a complicated and cumbersome task.
Companies have had to juggle the demands of various reporting requirements and with that constructive tensions. They’ve often maintained group values within their Enterprise Resource Planning (ERP) system, but have had to hold other values in numerous unstructured spreadsheets, for different countries, with differing formats, governed by different individuals. It’s a balancing act and for many, maintaining multiple views and values has been challenging and inherent with risk, but happily, times are changing.
Is multiple ledger functionality the answer?
A large number of companies are now considering or are in the process of finance transformations - the desire to do away with inefficient manual processes and the rising need for accurate and complete data are two of the main drivers.
In my role as a Tax Business Integrator, I’m seeing a number of companies, who have previously maintained reporting values manually, thinking ahead and truly taking advantage of their transformation projects and the new functionality their upgraded ERP systems offer.
To solve this particular reporting challenge, a number of the major ERP providers now offer multiple ledger functionality. Using a common chart of accounts, organisations are now easily able to record values for multiple valuation methods. The parallel process operates like a simple spreadsheet with accounts in the rows and values across as columns. Rules can be set up in advance to govern which transaction hits which ledgers (ranging from one to all). And yes, there might be some cost and effort to this exercise initially, particularly for complex areas like tax depreciation, but that investment will enable slicker, more automated reporting going forward.
Get ahead of the curve
In any transformation project, there are key design decisions made - one of those will undoubtedly be how many ledgers you want to operate in your new system. You could of course keep one ledger for the group values only, but then you won’t be maximising the potential available in the super charged ERP system in which your organisation has invested.
If you take advantage of this fully, there are significant benefits to having all the relevant data available in your ERP system including:
- Your ERP system becomes your single source of truth
- The new functionalities of your ERP system are exploited fully, and you can claim to be “sweating the asset”
- Your organisation benefits from enhanced compliance, governance and risk management
- A central approach on this drives standardisation - you can run global initiatives such as standardised tax reporting, prospective and periodic transfer pricing calculations
But remember, if you do decide to introduce multiple ledgers, work is needed to migrate the data to begin with and you need to have a clear understanding how you want things to operate. Taking action to review, harmonise and document your ledger requirements ahead of your ERP deployment, will put you in the best possible position before the ambitious timelines and competing tasks of your deployment take over. There are ways to get around the limited functionalities in previous versions of ERP systems in order to be ready on time. Our steer for those of you with the ambition to implement this for your organisation is to bring forward the analysis and decisions to ensure you don’t run out of road, and if help is needed, please do get in touch.
