It may seem self-evident, perhaps even amusing or slightly frustrating, but the reality is that high-quality, automated reporting or budgeting cannot be achieved without starting from square one: ensuring the quality of accounting data and revising the Chart of Accounts (COA) and Dimension structure. After all, the COA and Dimension structure are the foundation of financial accounting and reporting.
Indicators for Need to Improve Chart of Accounts (COA)?
If your Company faces these business and reporting challenges listed below, it may be time to revise and improve the Chart of Accounts (COA) as well as the Dimension Structure:
1) Business growth and increasing complexity
As your company scales, the increasing complexity of operations can make it difficult to maintain control over the company's actual results. This typically signals a growing need for fundamental changes across your accounting, reporting, and budgeting processes.
2) Inadequate reporting and extensive manual work
If your current COA and Dimension structure don't allow for the generation of automated reports that are relevant for decision making, tax, IFRS, management requirements, and stakeholder communication, then an improvement is clearly needed. Manual work spent selecting relevant accounting data and creating single-use spreadsheets is both time-consuming and inefficient.
3) Difficulty in profitability assessment
A well-structured COA and dimension structure should facilitate accurate profitability assessments of your products, services, projects, or stores, as well as the costs of various functions such as Administration, IT, Marketing, Debt Collection, Sales, etc. If deriving this information is challenging, consider an overhaul of your COA and Dimension structure.
4) Challenges with financing
If your current COA and dimension structure obstruct the presentation of information necessary to financial institutions, an upgrade may be in order.
5) Time-consuming monthly reporting
The process of preparing monthly reports should be straightforward. If it's consuming too much time due to varying requirements (statutory, IFRS/GAAP, group, consolidated reports), your COA and dimension structure may need improvement.
6) Unfriendly accounting data
If your accounting data seems overly complex or difficult to understand due to an illogical structure or unclear account and dimension names, this suggests a need for a more user-friendly COA.
7) Increasing need for error correction
If you find yourself dedicating more time and effort to identifying and correcting mistakes in your accounting data, a streamlined COA and dimension structure could save you time and increase accuracy.
8) Complications from international growth
Expansion through acquisitions and international growth can lead to difficulties in controlling the results of subsidiaries. If accounting policies and principles differ among entities, and the reports submitted by subsidiaries are unreliable, incomparable, and insufficient for decision-making, consider implementing a unified COA and dimension structure.
For further guidance, we recommend reading the article: “Designing a Powerful Group Chart of Accounts (Group COA) for Effective Automated Financial Reporting”.
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