DO STRONGLY HIERARCHICAL CODESETS REALLY MAKE LIFE EASIER?

In 2014, Australia’s motor vehicle registration authority changed their number plate structures. They moved from three alphabetic characters followed by a three number sequence (eg. ZZZ 999) to a single numeral followed by two alphabetic (repeated) (eg. 1AA 1AA). Why? They were running out of combinations. The old structure topped out at about 17.5 million combinations, whereas the new one provided for almost 45.7 million. This illustrates how a coding structure needs to allow for growth. 

A few years ago, I recall a briefing from some big name consultants on a proposed new General Ledger (GL) account structure. The string was a long one and entirely numeric. It provided for all sorts of attributes in common positions along the string. These included class, company, segment, centre, revenue type, expense type, asset type, liability type, equity type, activity type, resource type. Concatenated – the string was around 26 characters long. A place for every conceivable thing. Well, limited places anyway. As we know, life is not quite so neat! 

Whilst a number range can cater for a number of sub-accounts, not all sub-accounts get used and others hardly get used at all. This means that rolling things up hierarchically in the GL can be terribly inefficient. Fortunately, there are at least two complementary ways the string can be made more efficient. 

The first improvement is the introduction of alpha-numerics. This alone, increases a character position from ten possibilities to 36. 

The second improvement is to consider breaking the hierarchical link, This means that the account rollups and the report pointings are carried out in the overarching Corporate Management System (CPM). 

These two improvements reduce account range redundancy and enable the organisation to be more future proof. 

Looking at the number plate example, the original regime lasted from 1972 to 2014, a total of 42 years. The second, depending on population trends, could potentially last 130 years. Accordingly, a highly structured GL numeric codeset hierarchy may sound like a sensible way to go, but life is not like that.

 

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  • 2015-06-22 10:00:31
  • Mark Spicer
  • Enterprise Resource Planning, Transaction Processing, Process Control, Efficiency and Effectiveness, Governance, Systems Accounting