Chart of Accounts Redesign, our Experience

Chart of Accounts Redesign, our Experience

Author: Simon Hogg, PPM Practice Lead, Namos Solutions

Whether just doing an ERP upgrade or a fully blown Finance Transformation it is a good idea to look at the Chart of Accounts before embarking on that journey.

Over-time, the Chart of Accounts can organically grow to meet the everchanging requirements of a growing business. Incremental changes over a long period of time can ultimately result in an unwieldly document that is no longer fit for purpose.

In this blog post we talk about our experience, some of the common issues that we see in the Chart of Accounts for different organisations and the subsequent approach to commence a new Chart of Account design. Namos have been working on finance transformations for over a decade, we’ve seen the common issues and we’ve seen the efficiency benefits that can be realised from revamping the Chart of Accounts.

Common issues seen are:

  • Inappropriate representation and ownership across Finance, Tech and Operations for Chart of Accounts governance processes leading to a proliferation of values and out of control Chart of Accounts.
  • There is sometimes a trade-off between ease-of-use for end-users coding transactions in sub-ledgers and meeting the reporting requirements of Finance. Often this trade-off swings far too much in favour of Finance meaning confusion for end-users and a lack of data integrity.
  • Operational teams can carry out extensive work just to show a high level of granularity in finance data, which may not be needed. Often the reasoning for why this is done is because “that’s the way we have always done it”, even when key stakeholders have no requirement for such data.
  • Due to lack of sufficient governance of Chart of Accounts, Accounts are no longer used and have zero balances on them. I.e.  they just cause noise and a fat unwieldly Chart of Accounts.
  • With a similar result to unused historical processes, new accounts can be added without proper consideration for how they will be populated from sub-ledgers.
  • No clear ownership of accounts and rationale as to why they exist.
  • Creating accounts or segments for financial data that should be extracted from the sub-ledgers. This means that FA movements or detailed Procurement Categories are replicated in the Chart of Accounts.
  • Accounting segments and hierarchies no longer meet the reporting requirements of FP&A, or the wider business or even key senior finance stakeholders.
  • Tax requirements change and the business has then ‘shoehorned’ a Chart of Accounts to accommodate and to facilitate the population of tax returns which can be obtained from sub-ledgers if the ERP is designed correctly.
  • Over reliance on EPM tooling and reporting to understand basic accounting transactions, that should be analysed in the ERP system.

Any of these issues can lead to inefficiencies and lack of integrity in the Chart of Accounts. Ultimately, this can mean that the Chart of Accounts is no longer supporting the business but hindering it, as important decisions based on finances are either inaccurate or delayed.

What are the key activities and things to think about when defining a Chart of Accounts?

Establish key roles:

Chart of Accounts TeamA Project Chart of Accounts team made up of relevant SMEs and key representatives:
-Finance Control
-MDM tech representative
-Namos R2R Consultant
The Project Chart of Accounts team would co-ordinate the planned activities and then propose the new Chart of Accounts for the Steering Group.
Chart of Accounts Steering GroupA Steering Committee made up of key Project Sponsors that can sign off/agree the new Chart of Accounts with a senior Namos Representative.
Account OwnersHas overall accountability and oversight of what lands in that account and can provide the rationale for the accounts existence and how it is used.
Functional TeamsFunctional Teams/SMEs from across the business in P2P, O2C, R2R, Projects, Fixed Assets, Intercompany, Reallocations, Tax and FP&A, can provide insight/support to the Account Owners on establishing Chart of Accounts values.

Key Activities Include:

1. Define Chart of Accounts Segment Structures

The first thing needed to be done is to consider the key objectives of a Chart of Accounts and brainstorm with key stakeholders a Chart of Accounts structure that supports the following:

  • Statutory and regulatory reporting requirements
  • Financial and managerial reporting requirements
  • Business planning and budgeting requirements
  • Support new and future business initiatives and ways of reporting

Nb. Operational reporting requirements should be met by the sub-ledgers such as Procurement, AP, AR, FA etc. not shoehorned into the Chart of Accounts design.

In the case of Fusion, 3 key segments are required as a minimum. (4 if using Intercompany):

  • Legal Entity: Balancing segment that reflects organisational units.
  • Cost Centre: Collection of costs managed by someone/department.
  • Account: The classification of each transaction.
  • Intercompany: Only used for IC transactions and to identify the partner LE for reconciliation/consolidation purposes.

2. Define Chart of Accounts Segment Values

Next step is then to define the Chart of Accounts segment values and, if using the existing Chart of Accounts as a basis for defining the new one, an Account Owner needs to be assigned against each account. An account owner has overall accountability and oversight of what lands in that account and can provide the rationale for the accounts existence and how it is used.

 Then the key activities for the Chart of Accounts Project Teams are:

  • If current segments are used understand what is obsolete, what has balances and what can be purged.
  • Work with nominated Account Owners to ensure the each values has a rationale for existence and that support key Chart of Accounts objectives as defined above in 1.
  • Work with Account Owners to understand the rationale for the accounts.
  • Work with functional teams (P2P, O2C, PPM) in the implementation to understand what data can be held in subledgers and supported by reporting out of the subledgers.
  • Work with functional teams to understand key subledger control and clearing accounts.
  • Work with operational teams to understand accounts needed to keep the business functioning. I.e. clearing accounts to identify operational and/or control failures.
  • Work with Tax to understand what their requirements are for VAT disclosure. Understand whether tax what can be captured in GL vs held in the subledger. I.e. Procurement Categories and Memo Lines in AR.
  • Establish a robust Chart of Accounts governance process for the future.

3. Finalise Chart of Accounts Segment Values

After defining the values take a step back and circle back to base principles. Does the new Chart of Accounts meet the following:

  • Statutory and regulatory reporting requirements
  • Financial and managerial reporting requirements
  • Business planning and budgeting requirements
  • Support new and future business initiatives and ways of reporting

Is the trade-off between ease of use for end-users coding transactions from the sub-ledgers and meeting the requirements of Finance correct. Have you got the balance right? Do we need to go back and address this and challenge with the Account Owners.

Once the Chart of Accounts team is happy with the proposal this should be presented and signed-off by a Chart of Accounts Steering Group that has the authority, experience in Chart of Accounts design and understands the implications/benefits of a robust Chart of Accounts.


Taking on Chart of Accounts redesign is a daunting task and the consequences of not getting it right could lead to substantial inefficiencies going forward both within finance and across operations. This can subsequently lead to poor operational and strategic decision making, impacting the organisation long-term.

It is of critical importance to give the Chart of Accounts the focus it deserves. We have laid out some of the most important considerations and tasks for the redesign project. This project requires appropriate time and resources, it will pay dividends for the long-term future of the organisation.

Finally, once implemented ensure you have strong Chart of Accounts governance process to ensure it doesn’t become out of control and instead, supports the business going forward.