Is it possible that after over 600 years of debit and credit that you could make the chart of accounts sexy? That might be going a bit too far but that’s the direction Mark Nittler, VP financial products at Workday [recent product client] would like you to go. Talking up the recent Guggenheim Partners LLC deployment, he says:
The chart of accounts in traditional financial software often mutates into an unmanageable behemoth requiring additional custom software just to interpret it for data entry or unwind it for reporting, due to the limitations and rigidity of 30-year-old system architectures. And fixing something so deeply embedded is not only hard and unglamorous, it is also practically impossible, short of starting completely from scratch. So the chart of accounts doesn’t get fixed, and users of traditional financial software make do with clunky systems and workarounds.
However, if you do start over and rethink, redesign, and rebuild as we did at Workday, the results can be revolutionary. Our customer Guggenheim Partners LLC was able to dramatically reduce general ledger complexity with its deployment of Workday, which we talk a bit more about in a news release.
In Workday Financial Management, the rigid code block structures of traditional financial software don’t exist. Instead, Workday captures transactions as business events in order to create a comprehensive financial and operational view of a customer’s business. Customer-defined Worktags are tagged to transactional data and used to identify the key dimensions of the business that management would like to track and analyze, such as customer, product, region, and project. As a result, customers can vastly simplify their chart of accounts structure without losing critical business visibility.
OK – so it’s a bit of a pitch but this is a really big deal. Last year, as I evaluated the strengths and weaknesses of the financials solution, the notion of getting rid of the code block and replacing (most) of it with tags was such a brain dead obvious idea to me I was surprised no-one had thought of it before. Of course Workday can’t get rid of the whole code block hierarchy but it keeps it to a minimum.
The net result is as Nittler describes. But does it work in the real world? One of the exercises we went through was a re-organisation. We were in a live demo run over the internet and I asked the company to make some structural changes to the way in which the test system was set up. This was done by establishing new tags and then re-organising around the new tag structure. It took no time at all. Once the new tags were established and the analysis rules tweaked to take account of the way I wanted them to appear, the financial analysis was automatically updated. No rewriting of reports. It was just ‘done.’
From a line of business perspective, this opens up all sorts of new opportunities to develop analysis needed to run the business. Users are no longer constrained by what they’re given. Subject to security controls, they can create their own tagging systems to reflect what they need. Think about it for a moment: it no longer matters what the accounts function deem as appropriate tags or account codes. LOB people can define their own.
In the real world, nothing is quite that simple and organisations will have to think through how they choose to organise tagging systens. The difference is that if one system doesn’t work for whatever reason you can always scrap it and start over. Try doing that with a 72-character code block. It’s a non-starter yet one of the key reasons that organisations remain locked into old systems. I say that’s an opportunity to rethink the system of financial record not just as a static entity but something that forms the basis of bringing numbers to life.
Nittler closes out with:
Hot new technology is always cool, but re-thinking the basics can be sexy, too.
I never thought I would hear that said about anything to do with financial management software but then nothing surprises these days. Net-net: the code block is dead, long live tags.