Harmonizing the SAP Chart of Accounts

Over several decades SAP has established its business solutions as the global standard ERP with many companies. SAP has extensively enhanced its solutions to offer numerous options for configuration and ways to set up processes and process data. During its lifecycle, an SAP system can grow organically or become fragmented at the same time. Going through a standardization and harmonization process may address this issue, but it requires adapting the ERP system with any organizational change. A typical example is the consolidation of different charts of accounts in a company.

Definition

The chart of accounts in an SAP system is the structure containing the G/L accounts used by one or more company codes in accounting. For each G/L account, the chart of accounts shows the account number and the account name. Additionally, it holds information that determines the function of the account and in turn that controls how the account is created in the company code and in the controlling area.

It is mandatory to assign a chart of accounts to each company code. This chart of accounts is then the operating chart of accounts and is used by financial and cost accounting for daily company code postings. If cost and revenue accounting is active, the chart of accounts is also used for postings in the controlling area. When using multiple company codes, the same chart of accounts can be used for all company codes. Alternatively, a maximum of two additional charts of accounts is possible.

Organizational changes also require system-side adjustments

There are many reasons to consider a chart of accounts harmonization or conversion. Examples include a change in company structures, legal requirements, different accounting regulations, new business models, or an upcoming SAP S/4HANA transformation.

To prevent the chart of accounts from becoming unmanageable in such situations, the G/L account process should be clearly defined in terms of organization and content. That is exactly the goal when optimizing or harmonizing the chart of accounts: laying the foundation for effective and efficient financial and management reporting with a structured, accurate, and well-maintained ledger and chart of accounts.

The seven advantages of a harmonized chart of accounts

A chart of accounts harmonization leads to less interfaces and improved processes.

	Standardized posting processes
	Cleansed accounts
	Simplified and standardized administrative processes
	Reduced transaction cost such as posting, processing, and controlling costs
	Detailed reporting for cost reasons, balance sheets, profit, and loss analyses
	Unified process view for all business units
	Potential savings through considerable reduced operational effort

Your approach to a harmonized chart of accounts

An SAP chart of accounts harmonization process typically begins with the specification of the target chart of accounts. Important changes to the general ledger accounts are planned and accounts receivable, accounts payable, asset and subledger accounting, and cost types are reconciled. Considering the different business processes, the posting logic is analyzed and the accounts’ detailed settings are determined. Next, an as-is and to-be analysis are conducted along internal alignment meetings.

For the audit preparation, an auditor coordinates the target chart of accounts with the auditing authority. At the same time, the involved parties agree on the correct implementation to prevent any issues at a later point in time.

The process continues with setting up a new chart of accounts. This means that a new chart of accounts and general ledger accounts are created. Alternatively, a new general company code layer is being generated during migration of the original chart of accounts by mapping source accounts to the target accounts.

The configuration of the chart of accounts is being addressed in the next step with the specific individual requirements as input. The configuration depends on whether general ledger accounts are to be standardized, restructured, or split. To accomplish these tasks, customers can benefit from the dedicated Natuvion Chart-of-Account Harmonization Service.

The configuration is followed by the technical migration of data. A smart transformation tool can accelerate some steps during this phase through automation. The Natuvion DCS is such a tool that provides additional support with controlling and monitoring capabilities.

The project concludes with a transformation and function test phase. All steps of the harmonization process are being validated in detail. It verifies that all steps in accounting work smoothly with general ledgers, balances, and consolidation and results being accurately reflected in the new general ledger accounts.

Mitigating potential risks

Internal restructuring programs are intended to simplify processes and make them more efficient. The path to get there can be individually determined and adapted. This includes the chart of accounts conversion with all its relevant transaction, customizing, and master data.

However, this path can bear some risk. Risk which can turn a conversion into a difficult undertaking or jeopardize it in its entirety. Do not miss coming up with a plan for the following five critical points.

1. Early involvement of the business

A central activity of any chart of accounts conversion is the chart of accounts mapping. The business knows best which processes are behind the individual accounts. Therefore, involving the business is absolutely necessary.

2. It is not only about Finance

There are situations where it is not obvious that changing the systems impacts not only controlling but other departments or subsidiaries. Particularly in corporations, several departments can be affected. Due diligence is required to assess potential impact and determine responsibilities in advance.

3. Technical aspects of the conversion need special attention

The SAP general ledger account comprises several technical fields. It may well be that certain fields or even every field must be fully compatible in order to proceed with the conversion. Typically, this analysis is a time consuming and error-prone manual activity. With every mapping update another iteration is required, increasing the effort further.

4. A realistic timeline leads to success

When changing the chart of accounts it is often assumed that a one-by-one account comparison is sufficient. However, each account is linked to diverse business processes and value flows, as well as a technical structure that must be compatible. A realistic schedule contributes immensely to a feasible transition plan.

5. Test, and test again, and again

What has been put on paper needs to work in real life. Confirming that the processes work as designed and lead to accurate results after the conversion can only be verified through multiple test runs. All processes must be continuously tested during the project with employees being involved early for the best experience. Transparency, adoption, and security are key aspects of a successful change process.