The whole purpose of accounting is to keep the books in balance. Debits
equal Credits. Or so it seems. Many people spend countless hours
ensuring that all transactions are properly recorded on a timely
and accurate basis. So wouldn't it be nice if there were some ways
to make the "balancing act" a little simpler and less time consuming?
Most, if not all, accounting and enterprise resource planning (ERP)
systems balance transactions at the GL Account level. Rather than
balancing transactions at an Account level, why not balance at an
individual Account Segment level? This way, when you need to balance by
a Department, Branch or Division in a for-profit organization or a Fund
within a not-for-profit organization, the transactions are balanced at
each individual segment. This will ensure two things:
- Errors in posting that would not normally be caught validating entries at an Account level will be identified at the Segment level; and
- It is possible for the accounting system to automatically create balancing entries whenever Debits do not equal Credits at the Segment level.
The benefits of this approach are that the Due To and Due From intercompany
accounts will always be in balance and it is possible for entries to
be created across multiple company databases to keep all companies books
in balance without any manual entries.
An Issue of Productivity and Value
This approach not only addresses the need to keep the books in balance,
but also increases the productivity of the accounting staff. By
automatically creating balancing entries, accounting staff can save
up to one day per month and put their time into more valuable activities
such as reporting and analysis of financial information.
Forward thinking accountants want software that not only records transactions
efficiently, but also automatically generates the correct journal
entries as you post transactions to the General Ledger. This is especially
true for organizations with transactions that span multiple entities
such as Funds, Branches, Departments, Companies or Regions.
A Potential Solution
An Inter Entity Transactions module will do just that. The software
actually generates all Due To and Due From entries required to keep
segments in the Chart of Accounts in balance automatically as you
post transaction batches into the General Ledger. These batches can
originate from the GL, any Subsidiary Ledger, any third party module,
any other company database and any external system that
generates GL transaction batches.
Conceptually, the system is surprisingly simple to set up. If you already
have the segment codes you need (country, company or fund) that are used
to generate inter entity transactions, you simply define which segments
in your General Ledger Chart of Accounts are Entities.
Installing Inter Entity Transactions offers tremendous benefits. This
module not only saves time and reduces the possibility of errors,
but also detects posting errors your GL
wouldn't
detect. For example, a journal entry that is in balance but contains
the wrong GL Account would be accepted as a valid journal entry in
your General Ledger software.
In addition, by using Inter Entity Transactions, all journal entries
not only have to be in balance (ie. Debits equal Credits) but also
have to balance within each entity. Because Inter Entity Transactions
validates the segments defined as Entity segments and only allows transactions
that correspond with pre-defined Transaction Routes, it will identify
posting errors that would put the entities out of balance.
As a former practicing accountant, I love this product. I wish there was a module like this when I had to manage journal entries and generate financial statements. It would have made my life a lot easier and less stressful.
