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We've talked about creating an environment where critical data follows a clean interfaced path from one system to another without detours via Excel. The goal is to guarantee data integrity. In the June article I took you on a fishing trip to help find the critical data needed in management reporting and tag it as the single source of truth.  

 

The journey is complete. You have defined a data path for critical data to follow that excludes Excel. The fishing trip is over. You found the exact data you were looking for and know where to go back for more. And now you have this big heap of critical data that looks like chaos.

 

How do you make sense out of it? What tools or approaches can you use to organize it and learn what it has to tell you?  

 

You encounter situations and use tools every day that exhibit a natural order. We take these types of natural order for granted. But at some point in the past someone had to suggest them as a way to solve a problem. As towns grew into cities, leaders needed a way to add numbers to locations on a street. When our ancestors crated languages, someone decided A would come before B.

 

Now consider all the data that your front-line systems create every minute. One of IT’s key roles is to ensure that interfaces can easily move data between applications. This includes critical data destined for the general ledger in accounting, the ultimate source of all things financial. Interfaces are basic. The real question is how to organize the data to make reporting more efficient and logical. IT needs to help with this process.

 

General ledger applications use account numbers to arrange data. The chart of accounts in nearly all financial systems follows a few basic accounting principles in its sequencing. In the balance sheet portion, assets come before liabilities, which come before equity. The income statement section starts with revenues, followed by direct expenses, overhead and fixed costs. Someone developed this order.

 

The hospitality industry started standardizing financial reports in 1926 with the first edition of the Uniform System of Accounts for the Lodging Industry (USALI). This guide brought a greater level of order to the way most of us design our chart of accounts. The rooms department comes before food and beverage. Departmental revenues are followed by cost of goods sold, payroll, and other expenses directly connected to generating the revenue for the department. 

 

The key to USALI’s organization is the general ledger account number. It might seem like a random sequence of digits, but when you look at it in the context of a full chart of accounts, a pattern appears. 

 

Consider the reality of setting up an application for the first time. The implementation phase often begins by completing workbooks full of configuration information. If it’s a new general ledger, someone must define the chart of accounts to be used. A new property management or point of sale system will need new transaction codes.  

 

So where do you start? There’s no pre-defined order. In fact, there’s nothing yet defined to put in order. Are you surprised this isn’t predefined by the vendor? Me too!  I’ve suggested that any vendors selling us financial systems should understand USALI. 

 

There are five segments and each subsequent segment further defines data into logical groupings. These segments are numeric. Start a numbering sequence in each segment that translates into the order they’ll appear on a finished report. Usually it’s from lowest to highest. Additional segments may be helpful, but too many will cause confusion. 

 

Taking the time to organize the data this way allows native reports, sorted numerically, to appear in the same general order as a final report. This can take a great deal of time to develop. Luckily, most organizations don’t replace their general ledger systems very often. 

 

The USALI-based logic used in financial reporting systems can easily be adapted to arranging data in your front-line systems. POS systems use transaction codes to define the lowest level of data. Every transaction code is tied to a revenue center (restaurants) and revenue category (food, liquor, beer, wine). You’ll define the USALI-based logic when you fill out the configuration guide.

 

USALI logic-based revenue center numbers would start with restaurants and bars (venues), followed by room service, and then banquets. If you have multiple venues, follow the department order established in your general ledger. This usually starts with your three-meal restaurant then small venues, then bars. You could even use the same numbers in both systems. Now a canned daily report from your POS will follow a similar flow to the monthly financial statement.

 

Wasn’t that simple? It amazes me how many vendors don’t take a proactive approach to out-of-the-box, USALI-inspired configurations that help guide novices through this process.

 

If you’re in IT or finance, do yourself a favor: Don’t let others create configurations that have no logic. Be the resident logic leaders and arrange the data right the first time. An efficiently designed data structure makes implementation of overlay tools for analytics, budgeting, and planning much easier.

 

Ron Strecker is the chief financial officer for the Al J. Schneider Company.