Do you wish your finance system was always in balance?
The Unified Ledger vs The Modular Ledger
Did you know that there are some finance systems that can never be out of balance?
One revolutionary idea that has changed the landscape of accounting software is the unified ledger. A single combined (unified) ledger refers to a comprehensive and integrated system that consolidates various financial transactions and information into a single, cohesive platform. Unlike traditional accounting systems that incorporate separate modules for different financial functions, a unified ledger merges these functions into one unified system.
On average, accountants spend between five and ten days completing month-end tasks using a modular system; and in the worst cases, this timeframe can extend to three weeks. The process entails a manual review of all transactions to ensure balance accuracy between different ledgers, sales, purchase and nominal. As a unified system, Aqilla streamlines this process to just half a day. When aiming for self-service reporting, the assurance that the numbers are consistently accurate is vital, and with a unified ledger you can confidently rely on the system to maintain perpetual balance. That being said, it is surprising how few articles there are that explore the emergence and profound impact of the unified ledger on accounting systems. Is it possible that the historical key players in the market were too deeply ingrained in the concepts of modular accounting to completely embrace this innovation? Nonetheless, you'll probably discover that this ledger progression has been incorporated into the majority of modern software brought to the market, such as Xero and Aqilla.
Going back in time to when traditional modular systems, resembling the days of separate General, Purchase and Sales Ledgers meant that accountants manually wrote information into large paper books or ledgers. This ensured that all of the individual entries were added correctly to the control totals before any transfers were made. In the late 1970’s computer experts spotted the potential for writing accounting systems using computer software and the modular accounting software entered into the market. Modular accounting software reflects the historic process by either generating information in the background or by batch updates from one ledger to another.
The unified ledger was a revelation to those accustomed to the complexities of traditional modular systems. In a unified ledger system, all financial data is stored in a single database, providing a real-time and holistic view of an organisation's financial status. It is a single book in which two entries, a debit and credit, are made at the same time. All of the debits add to the same value as all of the credits eliminating the need for control accounts and tedious transfers between ledgers.
The goal of a unified ledger is to streamline accounting processes, reduce errors, and provide a more transparent and comprehensive view of an organisation's financial health. This approach is part of the broader trend towards integrated and technology-driven solutions in modern accounting practices. The advantages of embracing a unified ledger system are manifold, addressing many of the challenges faced by modern finance departments.
Advantages of Unified Ledgers
Experience the seamless balance of a unified ledger's single-entry system, eliminating the need for reconciliation among general, sales, and purchase ledgers. Having all ledger data in one place translates to immediate availability for unified reporting and the eradication of background processing. This results in closing the books faster and boosting overall efficiency.
Given the increased efficiency of utilising a unified ledger, administrative tasks become swift and error-free, liberating resources for strategic analysis and other essential functions.
Streamlined 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.
This dynamic approach allows configurations tailored to the unique needs of each business unit, adapting effortlessly to changing requirements and can even capture additional data, depending on the account or 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 made much simpler; this is because the system does not rely on generating all the permutations of accounts 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.
The power of unified ledgers combined with Big Data systems paves the way for business analytics that outshine the competition.
Enhance your flexibility:
A unified ledger system excels at effortlessly handling multiple currencies—local, transaction foreign, reporting and more. User-definable ledgers add another layer of flexibility, catering to specific purposes like budgeting or alternative treatments.
While sceptics have expressed concerns about report writing becoming too complex as the user has to distinguish between the supplier, customer and normal transactions; innovative solutions such as Aqilla address these concerns by providing users with an extensive range of attributes, turning potential drawbacks into advantages. This empowers organisations to add data fields to their system independently and adapt to evolving needs in minutes.
Others suggest that as data volumes increase, the reporting may become very slow. This is indeed prevalent across both unified and modular ledger systems. The route cause of this issue is linked to another aspect of a systems architecture – is it transactional or event-driven? ie. is it designed to cope with high volumes of transactions or has it instead derived from a CRM system and been designed to react to events? Being an event-driven system, Aqilla offers a unique solution for effectively handling large volumes of transactions, while mitigating the reporting slowdown issues commonly associated with transactional-driven systems.
In conclusion, if your finance department seeks software that elevates automation and reporting then an accounting solution that utilises a unified ledger is your gateway to increased efficiencies. Amidst the increasing demands on CFOs to optimise processes and focus on analysis, the choice of software becomes a strategic imperative.
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