Why Hierarchies Matter in ERP
Why Hierarchies Matter in ERP
In complex organizations, operations and finance are often at odds.
Operations staff want to gain efficiency. So they remove silos and eliminate duplicated effort.
But this raises challenges for finance departments. For them, working across multiple statutory entities is fraught with dangers: the fear of hidden costs in unreconciled intercompany balances; the pain of endless cost recharging, and the inherent risks of a don’t-ask-too-many-questions approach to consolidation.
Thankfully, this conflict of interests is no longer a foregone conclusion. Recently, finance software has cleared a middle path: hierarchical configuration.
More than jargon
I get it: hierarchical configuration sounds dull and hopeless technical. You won’t hear many ERP marketers talking about it.
At Xledger, we’re a bit different. We talk about hierarchies whenever we can.
Why? Because we believe that hierarchical configuration (HC for short) holds incredible promise— especially for multi-entity organizations.
Of HC’s benefits, three provide the best illustration.
1. Reduces risks to finance
Hierarchical configuration allows finance to maintain the integrity of statutory reporting while also delivering:
- Instant consolidation in real-time
- Drill-down from consolidation to individual transactions
- Reporting dimensions (e.g. an account codes or cost centres) applicable to some or all statutory entities in the group
- Customer/supplier record applicable to some or all statutory entities in the group
- Journal posting across multiple entities with auto-balancing of intercompany transactions.
2. Streamlines implementation
Suppose that your organization implements a hierarchical solution like Xledger. You begin by defining settings at the highest level (enterprise). Where you don’t specify deviations, your settings will automatically ‘inherit’ downward: to group, region, entity, sub-entity, and unit levels. As a result, software like Xledger implements at an absolue minimum in time and expense.
3. Simplifies expansion
Finally, hierarchies both shorten and simplify the expansion process.
Imagine that your organization is launching in a new country. With a hierarchical setup, there will be no need for time-consuming integrations or painful reconciliations. Merely create the new business units, specify any deviations, and let inheritance handle the rest.
How much time does your finance department spend explaining the movements in consolidated numbers? Reconciling inter-company balances? Creating and maintaining customer, supplier and reporting dimensions in multiple entities?
If you don’t know, you might want to find out.
Xledger has taken hierarchical configuration farther than any competitor. Our Cloud ERP solution pairs rapid implementation with unparalleled scalability. Xledger can navigate data hierarchies with advanced BI tools, including full drill-down and 360° drill-through capabilities. Accessible on any device from anywhere with broadband, Xledger also automates more processes than any other solution on the market.
For more information about hierarchies or how Xledger can serve your organization, please get in touch.
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