Sunday 9 July 2017

What Do You Know About General Ledger?

General Ledger's topic may not be a topic that is so interesting to discuss. Even for some people, the general ledger is just one of the tedious lessons to be taken to graduate business school. But believe me, general ledger can be the answer to various business problems you might encounter.

The general ledger has been around for centuries and plays an important role in completing 2 simple-looking tasks but in actual implementation quite difficult.

  1. The general ledger allows us to track values ​​over time. To be able to get account balance today is very easy, but to get a balanced balance on a day historically requires some sophistication.
  2. General ledger knows the difference between balance and balance changes.
We've all learned about the three basic financial statements when we study accounting. The income statement reflects certain earnings and periods that affect owner's equity. The balance sheet shows the balance of assets and liabilities at all times. But what makes the general ledger interesting is the cash flow statement.

A good general ledger should be able to retrieve the beginning balance in the period for the cash account, showing the impact of revenue and expenses for the period, and showing the final balance for the cash account. It's amazing how many low-end accounting products are struggling with this concept.

Although GL (General Ledger) is very important, but in fact no one takes the time to innovate this until it reaches its full potential. And I think I have a theory of why it could be like that: I believe that over the past few decades, all the innovations in GL have been created by users of accounting software, not accounting software vendors. Accounting software vendors just listen to what users want and blindly give them what they ask without understanding the reason.

It's time for vendors to step in and contribute to GL's innovation. The accounting system has been very good at generating financial statements, but the strength inherent in GL has begun to be ignored. Companies are looking for a more mature system that enables them to manage their finances as they see fit, without being forced into the box created by limited vendor capabilities. Users want more sophisticated functionality that is aligned with how to run their business, such as:
  • Ability to run financial reports through various data sets
  • Company-specific dimensions that can be budgeted, managed and tracked, and so on

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