How do I Implement Extended Business Analysis?

Transcription

1 How do I Implement Extended Business Analysis? Introduction. Extended Business Analysis allows you to look at the performance of your Enterprise in many different ways apart from just Company Wide Profit and Loss, Sales and Balance Sheet Reporting. For example, if your Company has a number of Locations, you might want to know how each Location is doing and, if you have different Customer Categories such as Retailers, Wholesalers, Internet Resellers, etc., how each of them is performing. The system facilitates such extended analysis by setting up each Location, each Customer Category, and so on, in separate tables (up to 6) called Analysis Groups and allocating Codes to each in a manner similar to the way Codes are allocated to General Ledger Revenue and Expense heads. We call the former Analysis Group Codes and the latter GL Codes. Many older and indeed many contemporary General Ledger Systems combine this Analysis Group Coding (sometimes called Cost Centre or Profit Centre coding) with the GL Coding (Revenue, Expenses, Assets, etc.) together into one single combination code such as Branch Department Expense Code for example. This is an overhang from, and was a consequence of, pre database file architecture Record Management Systems (RMS). However, this combined code approach places significant limitations on the subsequent analysis which can be achieved and on the extraction of data for reporting purposes. It can also be the cause of excessive General Ledger Master records being created since every GL Code must now be combined with every Branch and every Department within every Branch as part of the setup of the GL Accounts Code Table. This System, exploiting modern Relational Database architecture to the fullest possible extent, separates the construction of the Business Analysis coding structure away from the General Ledger Expense coding and only combines the two as required when Transaction Entry takes place and requires these codes to be entered. Thus, the GL Revenue & Expense Codes exist in only one instance while the Analysis Group Code structure and its hierarchy can be maintained separately (and indeed changed subsequently or extended later on) without reference to the GL Codes. Analysis Groups and Analysis Group Codes: The way we do this is to facilitate the set up of Analysis Groups (6), each of which can have any number of members or elements defined within them. These members or elements are known as the Analysis Group Codes ; For example, if we set up an Analysis Group called Location then it is possible to nominate all your business Locations, Offices or Shops as the components (i.e. elements ) of that Analysis Group and allocate an Analysis Group Code to each element. Another Analysis Group might be set up as Customer Category (meaning, for example, Retailer, Wholesaler, Distributor, Domestic, Industrial, etc.). And, so on.

2 Analysis Codes: At Transaction entry stage it would be very tedious and very time consuming to have to enter every relevant Analysis Group Code (i.e. every member or element) of every Analysis Group related to each Transaction or even each individual line of each Transaction. This is where Analysis Codes (not to be confused with Analysis Group Codes) come into play. The System facilitates the set up of individual Analysis Codes which can then be associated with or attached to one Analysis Group Code (member of element) of each of the Analysis Groups which we have created. Here s an example; When you quote an Analysis Code during Transaction data entry, its relationships to the elements of each Analysis Group to which that Analysis Code has been attached are inherited from the Group structures and carried on into the resulting Transaction Database Posting. Thus every transaction not only carries the GL Expense/Revenue Code and the Analysis Code, but also the six individual Analysis Group Codes all of which are individual database access keys. For reporting purposes, any one or, any combination of these 8 separate access keys can be used to build the required reports or queries. In the example above, you might want to enquire or report on the performance of all Sales to Retail Type Customers in the Northern Branch, or, all Internet Customers by Product Category. Thus, as the Sales Transactions and Purchase Transactions, etc., are entered into the system as part of the day to day operation of the system, the only required codes for Extended Business Analysis are the Analysis Codes and the Revenue/Expense Codes many of whom will, in any event, be presented as inherited default codes from Master Data Records, which of course, can be over ridden as required. Similarly, when Budget data is entered at the GL Code and the Analysis Code level, such data will be posted to the Database and presented, when requested, for enquiry and reporting purposes against the Actual data. Setting up your Analysis Groups and Analysis Codes: If you have a less complex business structure then it is quite straight forward to operate the system without Analysis Groups ( Cost Centres ) or Analysis Codes or, indeed, with just Analysis Codes only (see Paragraph 13). If, however, and for example, your business entails multiple Activities (for example, Purchasing, Manufacturing, Sales and Transport) in a number of different Locations (e.g. Northern Branch, Southern Branch, Eastern, Central, etc..), then it is most likely that you will want to monitor the performance (Profit & Loss reporting against Budgets) of each Activity and/or each Location as well as overall.

3 Extended Business Analysis facilitates this by allowing you to set up individual Activities, individual Locations, etc. and then Generate all combinations of both (or not as the case may be see 6. & 7. below) which can subsequently be edited to delete any invalid or un used combinations (e.g. The Northern Branch outsources its Transport or Central doesn t Manufacture). This is only one example of the use of Business Analysis. For example, if you are in the Transport Sector you might want to set up each Truck as a Profit Centre, or in Retail, you might want to Analyse and Report on the performance of your Product Lines in each individual Store outlet. Let s say you have coded Northern Branch as one element (= NO ) in the Analysis Group which you have called Location and the Manufacturing Division as 02 as one element in the Analysis Group known as Activity and the Department as QC (for Quality Control ) as one element in the Group = Department, then the Analysis Code to be used, in say the final stage of Manufacturing in the Northern Branch, is NO 02 QC. However, for the purpose of this example we are going to demonstrate how Branch (or Location), Activity (or Department) and Customer Category might be accommodated within the system. 1. The first task is to implement the nomenclature you require throughout the system: The default name for the Analysis Code first provided with your initial copy of the system is Department which you probably now wish to change. Go to Analysis Analysis Setup Analysis Codes Department Tab and change the Department name to Division or whatever other name you want to call your combination of Branch, Activity and Customer Category (i.e. the name which you wish the Analysis Code to be known throughout the system). To implement, Click on Update. This new Name will subsequently be used throughout the system instead of Department. For example, in all Transaction Entry routines. 2. Next go to Analysis Analysis Setup Analysis Groups and set up the first Analysis Group together with all its elements. In this example, it has been set up as Branch with each individual Location coded as its elements (Northern, Southern, Western and Central, etc.). Do the same for each of the remaining five (or less) Analysis Groups that you want to set up; In our example, we are adding Activity as our second Analysis Group with its elements (Sales, Purchasing, Manufacturing, Transport, Quality Control, Admin., etc.);

4 And, finally, we set up and Code the Analysis Group Customer Category with its elements Wholesalers, Retailers, Internet, Export and Mail Order; N.B. It may well be the case that some of these Analysis Groups duplicate some of the Codes set up under Codes Maintenance (e.g. Regions and Areas). Analysis Groups provide P & L reporting, whereas Codes provide Sales Analyses. 3. Generating Analysis Codes using the Top Down approach: You can now Generate all the possible combinations of Branch, Activity and Customer Category in order to produce the full set of Divisions which should then be edited to delete any unwanted or redundant Divisions.

5 During this process you are first asked to provide, if you wish, a separator character. In this case we have chosen the Default. Afterwards you will notice that, not only have all the Division Codes been generated, but also that each Division Code has been automatically attached to its relevant Branch, Activity and Customer Category. If you add a new Branch or Activity later on, then you can also use the Generate facility to produce all the additional Division Codes and automatically attach them to each of the other Analysis Groups. When it comes to Performance Reporting (see the How do I Produce my Business Analysis Reports article) you may want to not only just view the performance of a single Division, but also the performance of an entire Branch, Activity or Customer Category or any combination of one, two or three of these and also compare the chosen combinations. Editing and Deleting Analysis Codes: 4. In our example, let s say there is no Manufacturing Activity in the Central Branch. We are therefore going to delete this Activity in the Central Branch for all Customer Categories. We must first Edit the required Division Code in order to set its Status to Inactive by clicking on the Active status tick and then activate the Update field; You can then delete the record, and so on for each of the other un required Division Codes;

6 Despite the fact that you are warned that a deleted Division cannot be undone, if you accidentally delete one you still require you can actually re enter and Update it manually. Using Analysis Codes: 5. When used throughout the system, here is an example of how the Division Code is deployed; Alternative Setup Bottom Up instead of Top Down : 6. Of course Generating all the Division Codes is fine where there is commonality of, for example, all Activities across all the Branches. In a number of instances, this is not necessarily the case. Say one of your Analysis Groups is Region (e.g. England, Scotland, Wales and London) and another is Branch (e.g. Glasgow, Edinburgh, Cardiff, Southampton, Finchley, etc.) then you wouldn t want Glasgow and Edinburgh to be repeated in Wales, England and London which is what would happen with the auto generate Top Down approach to producing the required Analysis Codes. In addition, referencing our original example, the Northern Branch might only have Export Customers and none other, or Transport is only relevant in one Branch, and so on. Using the Generate facility can end up in masses of redundant Analysis Codes which require excessive

7 deletion if they are not to clutter up the system or inadvertently be mistakenly used during transaction data entry. In both these instances it is probably best to use a Bottom up approach instead of the Top down employed by the Generate facility. In this case you create each of the desired combinations of Branch, Activity and Customer Category manually; Go to Analysis Codes Division Tab Add Division; Here you set up the individual Divisions and assign them to their relevant elements with each Analysis Group. (Note, however, Paragraph 10 below). 7. The same applies where, for historical or some other reasons (for example, see the How Do I Implement Project or Job Costing Analysis paper), you might have Analysis Coding (Division) numbering which bears no relation to the logic of the Analysis Groups and their Elements (e.g has some previous context within your organisation). Again, as in 6. above, having set up the required Analysis Groups and Elements, you can add Division 2902 and attach it to the relevant Analysis Group Elements; Ensuring Compliance and Gradual Deployment: 8. As far as possible you should set Analysis Codes at the Master Record level as Default Entries in order to ensure accuracy and reduce data entry during subsequent transaction processing

8 (e.g. Invoice Entry, etc.). In this example, when a New Customer is set up, the Division to which the customer belongs is also included as the Default in which case every time this Customer is called up in transaction processing, this Division is presented as the default entry (which can then be overridden, if required). The same facilities should be employed for Product, Stock and Purchasing Master Data records. 9. You can also enforce the entry of an Analysis Code (highly recommended) during Transaction entry and Processing against any number of General Ledger Codes by setting the check box to Yes as follows (General Add/Edit GL Codes); Codes with this Box left unchecked do not necessarily require a Division to be entered but do provide the opportunity to do at transaction entry stage that is to say, in this instance (box left unchecked), this field will be automatically by passed, but you can go back and place the cursor in the field in order to enter an Analysis Code if you require. One advantage of not enforcing the entry of Analysis Codes is that you can introduce Extended Business Analysis gradually. For example, you might decide to implement the system initially without any Business Analysis, then, later on, decide to implement it just for Revenue GL Codes and later on still extend it to Expense Codes and fully exploit the Extended Business Analysis facilities of the system. Overly Complicated Analysis Codes: 10. Be careful not to over complicate your data entry Analysis Codes. Let s say you have Analysis Groups = Region, Branch, Product Group and Product. The temptation here is to set up your Analysis Code as RE BR PG PR where RE represents the Region, BR represents the Branch, PG represents to Product Group and PR is the Product. However, it s pretty obvious that Glasgow is in Scotland (and only in Scotland) and Televisions can only belong to a Product Group Electrical Products. Therefore, it is not necessary to include the Region Code and the Product Group Code in the data entry Analysis Code. In this example the Code should only comprise BR and PR which can then be attached (see Paragraph 6. Above) to the Region Analysis Group and the Product Group Analysis Code (as well as to the Branch Analysis Group and Product Analysis Group).

9 11. Also, it is advisable to remember that other parts of the System might very well meet your requirements for some of your proposed Analysis Groups. For example, might not the Analysis Group in the foregoing called Product Type just as equally be accommodated within the standard Sales Analysis and Purchasing Analysis Reports in the System? Or, you might decide to extend the supplied standard GL Codes in the Sales and Purchasing sections (see the How do I extend the Standard General Ledger Code Package? article) to provide additional analysis within the Profit & Loss reports. Again, you should make copious use of the Defaults here by setting up the Default GL Codes in the Product Master records to ensure accuracy and reduce data entry workload. Modification and Merging of Analysis Groups: 12. As mentioned previously, addition of new Analysis Group Codes to existing Analysis Groups and, indeed, addition of entirely new additional Analysis Groups, is facilitated. As is also the Deletion of redundant Analysis Codes. However, as your Enterprise evolves, as well as setting up new Analysis Groups for new Branches, Product Groups, etc., you may also want to merge Analysis Groups as Branches are closed or amalgamated. You can do this by Re Attaching the old Analysis Codes to a new Analysis Group. In the example below we are merging the Northern Branch with the Western Branch. (This action must be repeated for all the Analysis Codes in the Northern Branch

10 unless, of course, it is a partial merger or the transfer of some aspects of trading from one Analysis Group to another); Even though we still retain the old Northern Analysis Codes for transaction entry purposes (if required), they will, from now on (if used), update the Western Analysis Group Code instead (along with, of course, all the continuing Western Analysis Codes). Also, by ticking the Change historical data? check box, all the previous transactions carrying the Northern Analysis Group Code will be changed to the Western Analysis Group Code for those Analysis Codes affected. Using Analysis Codes without Analysis Groups: 13. Some Companies may have quite limited requirements in the area of Business Analysis. In this case it is entirely possible to operate the system with just the Analysis Codes only i.e. without setting up or attaching them to Analysis Groups. Alternatively, some Companies might decide to implement Business Analytics in a limited way to start with and then, as the need for more extended analysis and reporting grows, decide to add Analysis Groups later on.