A hierarchy is an ordered series of related objects. You can relate hierarchy with “pyramid” - where each step of the pyramid is subordinate to the one above it. One can use drill up or down to perform multi-dimensional analysis with a hierarchy. Multi-dimensional analysis uses dimension objects organized in a meaningful order and allows users to observe data from various viewpoints.
A hierarchy is an ordered series of related objects. You can relate hierarchy with “pyramid” - where each step of the pyramid is subordinate to the one above it. One can use drill up or down to perform multi-dimensional analysis with a hierarchy. Multi-dimensional analysis uses dimension objects organized in a meaningful order and allows users to observe data from various viewpoints. These hierarchies need to be mapped to systems to ensure they are capturing the relevant business process information at relevant nodes to provide meaningful information for internal and external reporting.
The account hierarchy allows you to map complex organizational structures of a business partner (for example, buying group, co-operative or chain of retail outlets). When you create a hierarchy structure, you form groups of business partners (for example, for purchasing groups). You can use them for statistical purposes and for marketing and accounting and other meaningful analyses.
Organizational hierarchies represent the relationships between the units/segments that make up your business.
Larger organizations may require some hierarchies that are based on business units and other hierarchies that are based on shared services, such as human resources and IT. They need to create cost centers in shared service departments and position them under business units, so that the costs of shared services are appropriately allocated. Now we will explore some examples of reporting needs arising out of these different hierarchies and dimensions. Any how they add complexity at transactional level to record relevant information appropriately.
Some areas where we need to deal with dimensions/hierarchies are:
Defining organizational hierarchies enable to view and report on your business from different perspectives. You set up a hierarchy of legal entities for tax, legal, regulatory or statutory reporting. Various Legal entities can enter into legal contracts and are required to prepare statements that report on their performance. While performing business activities we need to capture and classify transactions at legal entity level to be able to identify transactions that belong to a specific legal entity. Therefore, there exists a need to define boundary at legal entity level to enable data classification, consolidation, security and reporting at these entity levels.
A large corporate may create a central mailroom to receive all invoices from its vendors for which it need to make payment. These invoices are raised on separate legal entities within the same corporate group, but mailed to a central processing center for accounting and payment. The shared service resource who is working on these invoices must specify in the Accounting System the different legal entities to ensure proper treatment of these transactions. The payments should be issued from the respective bank accounts belonging to the legal entity on which the invoice has been raised.
You can create a hierarchy for purchasing function to control purchasing policies, rules, and business processes.
Horizontal or Flat Organizational Structures
Flat organizational structure is an organizational model with relatively few or no levels of middle management between the executives and the frontline employees. Its goal is to have as little hierarchy as possible between management and staff level employees. In a flat organizational structure, employees have increased involvement in the decision-making process.
In some of the ERP tools, there are more than 12 accounting periods in a financial year. This article discusses the concept of accounting calendar and accounting periods. Learn why different companies have different accounting periods. Understand some of the commonly used periods across different organizations and the definition & use of an adjustment period.
A legal entity is an artificial person having separate legal standing in the eyes of law. A Legal entity represents a legal company for which you prepare fiscal or tax reports. A legal entity is any company or organization that has legal rights and responsibilities, including tax filings.
An organizational design is the process by which a company defines and manages elements of structure so that an organization can control the activities necessary to achieve its goals. Good organizational structure and design helps improve communication, increase productivity, and inspire innovation. Organizational structure is the formal system of task and activity relationships to clearly define how people coordinate their actions and use resources to achieve organizational goals.
A Company (also called corporation) may be understood as an association of persons in which money is contributed by them, to carry on some business or undertaking. Persons who contribute the money are called the shareholders or the members of the company. A corporation is an artificial being, invisible, intangible and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it.
Business Metrics for Management Reporting
Business metric is a quantifiable measure of an organization's behavior, activities, and performance used to access the status of the targeted business process. Traditionally many metrics were finance based, inwardly focusing on the performance of the organization. Businesses can use various metrics available to monitor, evaluate, and improve their performance across any of the focus areas like sales, sourcing, IT or operations.
GL - Unearned / Deferred Revenue
Unearned revenue is a liability to the entity until the revenue is earned. Learn the concept of unearned revenue, also known as deferred revenue. Gain an understanding of business scenarios in which organizations need to park their receipts as unearned. Look at some real-life examples and understand the accounting treatment for unearned revenue. Finally, look at how the concept is treated in the ERPs or automated systems.
Record to report (R2R) is a finance and accounting management process that involves collecting, processing, analyzing, validating, organizing, and finally reporting accurate financial data. R2R process provides strategic, financial, and operational feedback on the performance of the organization to inform management and external stakeholders. R2R process also covers the steps involved in preparing and reporting on the overall accounts.
Different Types of Organizational Structures
Modern business organizations run multiple product and service lines, operate globally, leverage large number of registered legal entities, and operate through complex matrix relationships. To stay competitive in the current global business environment, they must often develop highly diverse and complex organizational structures that cross international borders.
In every journal entry that is recorded, the debits and credits must be equal to ensure that the accounting equation is matched. In this article, we will focus on how to analyze and recorded transactional accounting information by applying the rule of credit and debit. We will also focus on some efficient methods of recording and analyzing transactions.
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