Page 310 - Accounting Best Practices

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14–7 Use the General Ledger as a Data Warehouse
to automate should be reviewed on a case-by-case basis to determine if it is cost-
beneficial to complete further programming work or to leave a few stray reports
for the tax preparation staff to complete by hand.
Cost: Installation time:

14–7 USE THE GENERAL LEDGER AS A DATA WAREHOUSE

When issuing financial reports, a controller draws all of the financial information
from a single source, the general ledger. However, there are usually a number of
operating statistics, such as headcount, turnover percentages, scrap, and the like
that must be accumulated from a variety of sources before they can be brought
together into a coherent group and inserted into the financial statements. These
can be quite difficult to accumulate at the last moment and must be added manu-
ally to the financial statements since they are not stored in the general ledger, the
primary source from which the statements are drawn. The reporting problem
becomes worse if management is accustomed to printing financial reports on its
own, for any operating statistics will not appear on them, necessitating a sudden
and unscheduled accumulation of this information by the accounting staff in
order to supplement the existing reports. Thus, nonfinancial data can introduce
some inefficiency into the production of financial statements.
The best practice that resolves this issue is to create additional records in the
general ledger for the storage of nonfinancial information. This is more com-
monly known as a data warehouse, since data of all kinds can be stored there.
When in place, this arrangement allows a company to store all the operating data
it desires in the same place as its financial data, which means that any reports
accessing financial data can automatically include operating data as well. Since
all possible information is listed on the reports, there is no need to supplement
them with additional, manually compiled reports. This is a much more satisfac-
tory state of affairs since all information and reporting is centralized.
There are some problems with changing a general ledger into a data ware-
house. One is that the existing software may not allow for this arrangement; if the
software is provided by a third party and regularly updated, there may be no way
to alter the situation without an appeal to the supplier to include a data warehous-
ing feature in its next update of the software. Another problem is that the existing
financial reports must be altered to include the new information that will now be
stored in the general ledger. Yet another issue is deciding who will update the
operations information and how it will be added to the general ledger. For exam-
ple, if it is deemed necessary to record the monthly inventory turnover rate at
each of a dozen facilities, who will collect and input this data? The answer is usu-
ally either to allow each department or facility to forward this information, have
the internal audit team (which is more objective in reporting disappointing
results) do it, or have the former do it with periodic reviews by the latter. It may