The standard topic for CFO-focussed publications is how Finance can escape day-to-day drudgery, connect with business teams and provide strategic advice. How does an accounting sub-ledger help?
As highlighted by a recent article from EY, the benefits of an accounting sub-ledger include the ability to more efficiently address core Finance processing responsibilities and building agility to manage new requirements.
Today’s environment places many new demands on enterprise finance teams – interpreting and adopting new accounting policies, integrating or divesting businesses, acquiring real estate or ensuring new legal entity compliance.
How do we reconcile this workload with Finance’s desire to be more strategic? What are some specific ways that an accounting sub-ledger help Finance get ahead in an environment characterized by constant change and ever new reporting requirements?
How does an accounting sub-ledger make Finance more efficient ?
An accounting sub-ledger helps Finance to more efficiently address ‘standard’ responsibilities in a number of ways, namely by:
- Enabling Finance to centrally support diversified reporting needs
- Increasing confidence in calculated results
- Reducing the burden of audit cycles
Centralising finance operations on a single platform is not achievable for many large and growing enterprises. General Ledgers and ERP systems are often not designed to accommodate new businesses, products or reporting requirements. In this way, an accounting sub-ledger can isolate the GL, and be used to implement multi-GAAP, multi-entity, multi-currency calculations at a single point in one’s architecture
At the same time, an accounting sub-ledger substantiates General Ledger balances with transaction-level detail. This enables Finance teams to drill down from the GL to see detailed balances without needing to go back to individual business teams or source systems. This improves finance’s confidence in reported results and reduces time spent on reconciliation and audit.
Agility to improve strategic capabilities
As EY hints, an accounting sub-ledger also improves Finance’s strategic capabilities.
An accounting sub-ledger supports enriched management reporting and improves performance management capabilities. Importantly, by linking the GL to underlying transactional detail, an accounting sub-ledger gives Finance the ability to deliver analytics that reconcile with financial reporting. By contrast, many business intelligence or data warehouse-driven analytics initiatives often fail Finance because they produce inconsistent results.
Enterprises with an accounting sub-ledger gain the ability to analyse account balances and financial results by different attributes, such as sales rep, profitability by customer, cost of goods by vendor/channel, etc.
Conclusion: The components of a best practice Finance architecture
There are many benefits to an accounting sub-ledger. Enterprise Finance teams increasingly look to use accounting sub-ledgers to create detailed accounting, support different reporting requirements and build a data foundation for next-generation financial analytics.
In a following post, we will detail three main components to an effective sub-ledger environment (an accounting engine, journals or data repositories and a sub-ledger, of course). For more information on these components, check out our ebook on Finance Architectures or let us know your questions by email to email@example.com.