Ledgers are the backbone of any accounting system. They are the central repository for all accounting data of an organisation and are pivotal to financial reporting. An organisation’s financial statements are derived from ledgers.
There are three primary types of ledgers: general ledger, sales ledger (accounts receivable), and purchase ledger (accounts payable). As a result of this multiple-book system, traditional financial management and ERP systems are built upon a modular structure – using three separated standard ledgers (general, sales, and purchase).
Accounts are reconciled by comparing the entries. Updates are batched from one book to another. Consequently, reporting and analysis are time-consuming and ineffective. Finance staff still have to spend hours preparing statutory and management reports.
What is a unified ledger system?
A unified ledger accounting system, on the other hand, uses a single book. All transactional data is put into one table where two entries, a debit and a credit, are made simultaneously.
Further, a unified ledger system relies on user-definable analysis codes for the reporting purposes instead of the fixed structure of account codes. Thus, the chart of accounts (COA) stays simple.
A unified ledger system, therefore, represents a quantum leap in accounting software. It streamlines financial reporting, provides users with real-time visibility into their data, delivers actionable insight, and facilitates collaboration among different branches and locations.Read more: 4 Must-haves for Oil and Gas Accounting Software
Benefits of a unified ledger system
A unified ledger’s benefits are manifold.
A unified ledger’s single entry system is always in balance and does not require reconciliation among general, sales, and purchase ledgers. Thus, there is an immediate availability for combined (unified) reporting across all ledgers.
As a result of having all ledger data in one place, without having to wait for background processing, you are able to close your books faster, resulting in greater efficiency.Read more: Why You Should Strive for an Efficient Financial Close
Streamline reporting and analytics
While traditional accounting software uses structured account codes for the purposes of reporting, unified ledger systems use a simple chart of accounts plus a range of user-definable analysis codes that have independent coding structures—much like an OLAP cube.
The result is a flexible coding structure that can be configured to meet the needs of every business unit and even refined to capture different additional data, depending on the account or the type of transaction.
Customers can easily configure the ledger to define the dimensions of data they want, and also easily adapt the account’s structure as business needs change. Coding changes are much simpler, as the system does not rely on generating all the permutations of account and segments (which can result in a massive combinatorial explosion).
Users can easily set up whole new analysis dimensions to cater to evolving data needs, for instance, translation of reports from headquarter to local branch account codes and vice versa.
A unified ledger system makes it easy to handle multiple currencies (local currency, transaction foreign currency, reporting currency, etc.) Furthermore, user-definable ledgers can be set up for specific purposes, such as budgeting or alternative treatments.
Case studies of unified ledger accounting systems
Unified ledger systems have revolutionised how accountants do their work and the way technology empowers the finance function. They lie at the heart of many modern financial management solutions currently offered by leading vendors. One prominent example is Infor SunSystems. Its unified ledgers provide users with up to 25 levels of analysis and 5 currencies per transaction.
Let’s examine these case studies to see how unified ledgers can benefit businesses.
Making reporting faster and easier
In order to improve the efficiency of its accounting and reporting systems, Astra Life, a leading Indonesia-based insurance provider, upgraded its enterprise financial management solution to Infor SunSystems.
Infor SunSystems has helped Astra Life streamline a number of the processes within its finance and accounting departments. Thanks to Infor SunSystems, the overall financial reporting cycle time has been reduced to seven days—six days faster than it was before.
This made it significantly less stressful for the company to meet its internal reporting deadline on the fifth of each month and provide reports to the regulators on the tenth of every month.
Streamlining operations worldwide
The Seventh-day Adventist Church’s objective was to find a flexible financial solution for use in a nonprofit setting in more than 1,500 sites around the world, and to stay up-to-date with current platforms, operating systems, and databases. The biggest challenge is that these sites are all so different, varying from schools to hospitals and from publishing houses to food industries - some with one financial staff member and others with up to fifty.
With Infor SunSystems, they have been able to set up eight standard analysis ledger dimensions as core worldwide values and allow two for localised customisation to enable further analysis at each site.
Unifying 3 different accounting systems
Fast Logics (the company name has been changed to maintain confidentiality) is a Vietnam-based logistics company. Since the first days of the company as a startup in the early 2000s, Fast Logics has grown rapidly. It received investment from a major multinational logistics firm.
However, the company’s accounting systems struggled to keep up with the remarkable growth. Fast Logics initially used local software for its simplicity and affordability. It later switched to a more prestigious system used by the mother company.
At one point, the company found itself working with 3 different accounting systems: one for internal reporting, one for local statutory reporting in local currency, and one for IFRS reporting in USD. The finance function had to regularly move data from one system to another.
By choosing Infor SunSystems, the company was able to do away with 3 disparate accounting systems. Infor SunSystems’ unified ledgers help Fast Logics comply with internal, local, and IFRS reporting requirements at the same time.