The chart of account (CoA) is one of the most important structures in business. It reflects all the activities a business is involved in and it provides a foundation for the majority of financial and management reporting. Correct use of the chart of accounts can both simplify operations and improve decision making capability.
Often on accounting projects, there is a gap between accounting expertise and systems expertise, this can result in a poor CoA design. This can easily be overcome by understanding the historical context and modern-day principles that surround the CoA. We can then better understand the implementation options in systems such as SAP ERP or S/4 HANA. This article will look at three topics:
Part I: Accounting: history & modern principles;
Part II: CoA settings in SAP ERP (from R/3 to S/4 HANA);
Part III: Common pain points and improvement initiatives.
Welcome to the inaugural version of ITW – ‘Interesting Things this Week’ 🙌🏻
In this newsletter I’ll be sharing some content from across the web that I found interesting. It’ll be loosely connected to business strategy and operations transformation, and I’ll try to avoid duplication with mainstream media.
This weeks post is around 900 words and a 3.5 minute read.
1) Opening an account
In this post ‘builtformars’ analyses the different experiences while opening a bank acccount across challenger and traditional banks. While the blog is focussed on UX, it’s also an interesting study on process. Whilst reading this I was thinking that a similar analysis could be carried out across various processes to easily compare customer experience across competitors. It’s a fairly cheap and low effort way to gain some insights, and isn’t often done so pro-actively.
2) Public attitudes on the fair use of data and algorithms in finance
(by the behavioural insights team and centre for data ethics and innovation)
Neural networks are the most common form of machine learning applied to decision making. These networks can; given an input, categorise it which is a kind of decision making. They do this based on ‘training data’. The classic examples relate to images. If you train a neural network with 1,000,000 images of cats from the internet the networks gain a degress of accuracy in being able to identify when a cat is present in an image on the internet. The accuracy is based on the range of cat images provided during the training stage.
Because of this training bias is big issue. Consider a neural network that reviews loan applications, it might be trained on previous loan applications and whether they were approved or rejected. Any bias in this training data will be designed into the neural network.
The report linked looks at the perceptions of the fairness of proxy information used in algorithms. If for example a neural network finds a pattern of certain postcodes having a high rejection rate, this may represent; just for illustration, an area where ethnic minorities live, in this case the postcode may be acting as a proxy for ethnicity.
The CDEI and BIT study looks at public perction on the use of algorithms. Unsurprisingly one of the conclusion is that the there is a negative perception of algorithms in loan-making.
Even though this technology is not well understood by the general public it’s promising to see that the public are cautious here. I expect that we wil see more focus on fairness and bias as these technologies find more and more commercial applications.
On Monday I read about Javier Rodriquez, CEO of DaVita; a chain of kidney treatment centres. His company automatically qualified for and received nearly $250 million from the US health care enhancement act (part of the pandemic relief package). The company and it’s directors decided to return the money as they felt they didn’t weren’t in need of it.
On the other hand, last night I read about Take-Two Interactive; the parent company of Rockstar, producer of the massively successful games Grand Theft Auto and Red Dead Redemption. Apparantly they cancelled a contract with a smaller developer; Star Theory Games, and then proceeded to poach over a 1/3 of the staff. It seems they started poaching even before the contract cancellation was finalised or communicated.
What’s the right line between profits and morality? A lot of companies incude a section on corporate social responsibility in their annual reports, but this tends to address topics like diversity, the environmen etc. I don’t see much on morality and ethics within commercials or supply chain.
4) Another failed use-case for blockchain
Recently I wrote a short article on how blockchain works. Once you understand how it works and how it compares to other technologies it becomes much easier to identify the use-cases that hold genuine value. On Tuesday I heard that Civil a blockchain journalim start up has closed down. I think this is a clear example of being excited about a technology and just looking for applications w/out really thinking about how appropriate it is and what the value proprosition is.
5) The Endangered Asian Century
I came across an interesting article from Lee Hsien Loong; no other than the prime minister of Singapore, addressing APAC and the sometimes difficult position the countries are palced in between America and China.
I remember since my University days; way back in 1996 – 2000, there was always talk of asia pacific becoming the economic super power of the world, with the west in decline. It’s interesting to see a slightly different perspective.
What I’ve been up to this week?
If you are interested in ERP or SAP I wrote about their HANA and S/4HANA products.
And finally, something fun…
When I’m working, or exercising or even taking a nap I sometimes like to play some music in the background. Recently I’ve been into lofi music. It’s super relaxing and it’s not at all intrusive so you can enjoy it while doing other things. You can look up some excellent artists like Jinfang, Tomppabeats or Nujabes or you can tune into one of the many streaming channels on youtube and let them do all the hard work of curating a playlist, I particularly like a channel called “ChilledCow”
I’ll also be sending this newsletter via e-mail in future, if you would like to receive it in you inbox please subscribe:
Recent years have seen a resurgence in large organisations taking on major SAP upgrades with the relatively new SAP business suite 4 HANA (S/4HANA) collection of applications. But what exactly is HANA? and what is S/4HANA? How is implementing or upgrading to it different from the R/3 upgrades that were significant programs for many organizations over the last few decades?
As SAPs core products have advanced and their portfolio has broadened it’s become difficult to understand how it all fits together. In recent years I’ve met team members and stakeholders working on SAP programs who struggled to articulate the basics of HANA. SAP projects can be complex and challenging partly due to this lack of knowledge. SAP have been addressing this by improving their communications and training, but understanding HANA can still be quite a lot to navigate.
In this article, I’ll briefly explain the history of SAP and hence the context that led to HANA as well as clarifying the technical concepts behind HANA, why they are important, and how the business application has changed.