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- Financial Reporting and Analysis can be easily run for specific segments. If segment 2 in your COA represents “Commodity” then you could easily run a financial statement by commodity. You could also group your sales reports at this level. Without segments, this is more difficult to do and typically requires custom reports that can be costly to maintain.
- Segments provide structure that can be enforced. If you want the last 2 digits of your GL Account to represent the Commodity and you are using segments, you would enter ‘4000’ for segment 1 one and ‘10’ for segment 2two. When you saved the account, the system would validate that you are using existing segment values and create your account description based on the segments. Without this, someone could accidentally add account 400020 and name it “Sales Revenue – Strawberries” when ‘20’ is the commodity code for Blueberries. If this happened, you would not know which part was incorrect.
- If you strive to keep your Natural Account segment as simple as possible and put the rest of your detail in your other segments it becomes easy to clone segments for new business entities. For example, if your segments were Natural Account, Department, and Division and you added a new Division, you could clone all the accounts with Division 10 to create new ones with Division 11.
- Account numbers are easier to read and memorize when you have clearly defined segments.
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- Do you need to separate GL Accounts by Company? If you run more than one legal company and you want consolidated financials you may want to consider adding a segment for the company.
- Are there any major areas of your products that would benefit from the ability to easily run financials or operating statements for? Seafood companies often want to separate revenue and expenses by Specie so they will have separate Divisions for Salmon, Crab, Halibut, etc. Fruit companies often want to separate revenues and expenses by Commodity so they will have separate Divisions for Strawberries, Raspberries, Blueberries, etc.
- Are there any major areas of your operations that would benefit from the ability to easily run financials or operating statements for? Companies may want to view costs by cost centers such as Plant1, Plant2, Sales, Operations, etc.
Some of the most typical segments we see common segments include:
- Natural Account
- Division
- Department
- Company
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Once you have determined how many segments you need, the next step is to determine how long each segment should be. Keep in mind that account numbers in a four-segment structure can get quite long and every time you want to look up GL Account number you will deal with that. For example, if all your segments were 4 digits and you had a 4-segement COA your GL Account length, including hyphens, would be 19 digits long (e.g., 1000-4000-0050-0020). When determining segment lengths, you should follow these rules:
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With the Natural Account, it is a good idea to start at 1000 or 10000 and increment them by 5 or 10 (e.g., 1000, 1005, 1010). This provides room so that as you need to add new accounts you can add them within the group of similar accounts.
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The last decision will be how you structure your chart of account segments to create GL Accounts. We recommend that if you use a company segment but Unless there is a reason to do otherwise, we recommend sequencing the Natural Account first. One exception would be that if you have more than one company configured in a single NorthScope company that you sequence your segments as:
- Company
- Natural Account
- Division
- Department
If you only use the company segment when you are creating consolidated financial reports across multiple NorthScope companies then we recommend that you sequence your segments as:
- Natural Account
- Division
- Department
- Company
The "Company" configured, you might want to start with Company and then Natural Account. The idea is that your COA sorts as naturally as possible and using this approach will ensure your Balance Sheet accounts sort before your Income Statement Accounts.
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