You’ve acquired a new company and they have their own GL system. How do you bring in your newly acquired company and have them map to your ERP chart of accounts while maintaining flexibility and ease of maintenance? And, more importantly, how can you encourage standardization of your chart of accounts across the organization?
This blog addresses the concerns the acquiring company would have while trying to merge the two companies as efficiently as possible. You could try several options to get this done, and we’ll take you through a few of the most efficient methods.
Fear not! You can get some sleep at night because we already have successfully done this with our clients and will share our experience with you. We have several ways on how to handle and streamline this new work load. Consider the following options:
- Try and setup all new businesses using your current ERP software
- Use Excel to consolidate
- Purchase a consolidation package
Rapid Assessment Meetings
During our meetings with company stakeholders, we discussed a few options and got feedback on their current ERP situations. The more questions we asked the more we understood that each company ran its business very different from corporate, and from each other. Each start-up had interesting stories and challenges.
Our findings confirmed the IT nightmare is real. Each company was setup with different GL’s and accounting segments. A couple companies used Business Units, while another had Departments, and 1 used Cost Centers. Those were not the only differences. We discovered revenue recognition differences, clinical trials, international business units using excel and Intercompany challenges. Most of controllers were not able to analyze revenue at a granular enough level to effectively support strategic planning.
Reviewing Options for Standardization Of Chart Of Accounts
OPTION 1 - Adding the new companies to corporates current ERP application
We reviewed the feasibility of bringing in the new subsidiaries by having them adopt the corporate account structure and by bringing them into corporate financial system as another user and another structure/rollup. This was ruled out, because the level of detail required would have resulted in a structure overload.
Things to think about when considering this process:
- Level of detail required from the subsidiary within the consolidation.
If the new company needs a level of detail that your system cannot comfortably handle from both a maintenance and a processing standpoint, that might be a deal-breaker for your decision to add them.
- Level of cleanliness of your existing account structure.
If your account structure needs massaging and additional work to make it more streamlined and logical, it wouldn’t make sense to require your subsidiary to adopt your structure until it was cleansed.
- Structure overload. Your system may have too much structure to chug through to handle reporting. If you have a need to be nimble, adding more sub-accounts may not be the way to go.
OPTION 2 – Using Excel to manually consolidate
We reviewed the feasibility of using excel and agreed it was not best solution. We all understand the trade-off’s with using excel and the extensive manual processes that would need to be put in place. Most of the finance department’s time would be spent on manual close activities and very limited time spent on value add activities like analysis and process improvement.
Excel weaknesses include:
- Reliability of Excel—errors can be introduced into the process
- Reliance on Excel for supporting data collection, analysis and reporting
- 10Q and 10K are rekeyed into MS Word then sent to the outside printed
- No version or process control
- Last minute Adjustments break the process
- FAS 109 is not aligned with the close process
- Errors are often introduced into the process because of the manual intensive nature of the close.
- Minimal collaboration between entities, divisions and groups within Corporate
- Difficult to share best practices across business units
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OPTION 3 - Purchase a consolidation package to help standardize chart of accounts
Thankfully one of client’s coworkers came from a company who had one of top-tier consolidation packages and IT purchased it. The consolidation package was Oracle’s Hyperion Financial Management (HFM). The cloud consolidation package is called Oracle FCCS – Financial Consolidation and Close Cloud Service.
Requiring the entire company to use a standard account structure in FCCS – the accountants thought this is the ideal option to consider, but obviously, there may be a few roadblocks in the path to standardization.
Typical roadblocks to pursuing this option include:
- The need for a new account structure or clean-up the existing account structures. In this case we had 5 different setups and each controller wanted to use one like theirs.
- The need to restate historical data into the new account structure and validate the restated data.
- The common problem of “implementing” a new application with new dimensions that will satisfy the entire organization.
However, all these roadblocks aren’t difficult to overcome necessarily; we simply knocked off each one before moving on to the next. We designed a new, custom HFM application that included all our requirements within 3 weeks from our initial interviews and built a prototype the following week.
We delivered the prototype to the entire consolidation team and discussed each company objective, before starting the actual build phase.
Then we built the application in segments. Demonstrating each new feature to ensure we got it right. Once the team agreed the task was completed, we moved on to the next task. This iterative approach was one of the major reasons the project was so successful.
We quickly mapped in all the data feeds from each application into the new corporate standard chart of accounts. This included the departments and business unit details into our custom dimensions.
Mapping – We had a couple of choices in our new HFM application, first we setup direct pulls for supported Oracle Data Integrator (ODI) connections such as JDE, PeopleSoft and Oracle/EBS, or have their GL extract a data file to mapped and upload.
HFM and FCCS includes a data loader that offers flexible mapping features.
Hyperion Financial Management (HFM) – Oracle’s data loader is bundled within the workspace through EPM Architect and has a very robust mapping feature. You can also load planning data from Hyperion Planning to Oracle HFM or FCCS or the other way around. Further, you can have the subsidiaries do all their own mapping and data loading – the data loader can be made available to more than just the corporate administrators.
Standardization Across the Company and Subsidiaries
Let’s consider the standardization option a bit further.
Fast forward, this process has allowed new acquisitions to fully be integrated in 1-2 weeks this past year. This is extremely fast compared to doing everything in the GL or manually. The finance team can quickly use the same process, along with the same reports to show the new numbers. The right path for this company was to implement Oracle’s Hyperion Financial Management (HFM) package.
Sure, if you have the need to standardization your chart of accounts across your organization, we say go for it...and let Strafford Technology help you be successful!