We have seen companies with regional entities spread across North America, South America, Europe, Asia and Africa desire to shift from a holding company mindset to an operating company approach. The CFO wanted all financial and controlling objects standardized globally. The number one object to harmonize was the chart of account. Another common scenario, we have seen is acquisition driven harmonization. The acquired companies have their chart of accounts aligned with the new parent company. This is typically a reporting and visibility initiative. At times the original chart of accounts in use doesn’t meet the needs of the company. It can be that be the length, logic, and structure did not properly capture the business and reporting needs of the company.
Regardless of the reason for the need to change the chart of account structure in SAP, there are two basic approaches to changing the GL account structure. One is the standard functionality within SAP and the other is the SLO (system landscape optimization) or LT (landscape transformation) solution. We will talk about both methods. Additionally, we discuss some of the key considerations when making a change.
SAP supports the ability to create a new general ledger account. The new account is then posted to while the existing account is offset. Below is an example.
Your original account was numbered 100 with the text ‘cash’ with a balance of $1000.
100 – Petty Cash
You create a new a general ledger account 11000 with the description of ‘petty cash.’ The current balance of the new account will be zero until a posting occurs.
11000 – Cash
Credit GL Account 100 for $1000 and Debit GL Account 11000 for $1000
GL Account 100 -Petty Cash
GL Account 11000 – Cash
That works. However, it is a point in time posting. That means going forwards GL Account 1100 is used after a specific posting period. If one looks at history, you will find the historical balances under the original GL account 100 and the current values going forwards under GL Account 11000.
Your GL account balances will look like the following. Let’s assume the change was made in April with the example.
This approach uses the SAP application. It can be automated to a degree, but remains a semi-manual process. More importantly, history stays with the ‘old’ account definition. Perhaps, there are unique country tax reasons for this approach. Yet, as you can see it is a ‘two-step’ approach that leaves history with the ‘old’ gl account. This implies a mapping exercise with reporting over multiple periods that span the postings to both the old and new accounts.
SAP Landscape Transformation approach:
SAP’s Landscape Transformation changes all usage of the GL account within the system. This means history is also adjusted. It doesn’t matter if it is open, or a closed item posted last period or several years ago, all data is consistently adjusted.
During the mapping effort, there are many consistency checks to validate that the mapping is supported by the SAP application. These checks range checks on the main GL master data in table SKA1 and the company code level GL accounts within SKB1 (master data table for the GL accounts by company code). These checks are very important in merge scenarios and look at the grouping of accounts by the balance sheet, P&L, open item managed, non-open item managed, reconciliation, currencies, postings and even more detailed items.
In contrast to the posting approach your account balances will look as if they were always using the new GL account number.
The Transformation approach ensures a consistent transformation of the GL account structure across transactions, master data and customization data. The process can be a rename / renumbering of individual accounts to a merge of several accounts into a single account.
Regardless of the reason a company needs to change their general ledger account structure, there is a proven approach that consistently converts the system. Over the years we have gathered a few lessons learned while doing many chart of account conversions. If you would like some information or a consultation on the best practices one of our experts can help you.
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