Home Articles VIEWPOINT: GENERAL LEDGERS Are they the right tool for the job?

VIEWPOINT: GENERAL LEDGERS Are they the right tool for the job?

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People have begun to treat their general ledgers like an all-purpose tool; but just because it can be used to do something doesn’t mean it should be.

Although the general ledger has the ability to house both financial and non-financial information, it is a financial document. The general information that it was created for, was describing financial transactions. So, knowing that you sold 5 000 T-shirts, that they cost R50 and sell for R150 each, is financial data and belongs in the general ledger. The colour, size, whether they were bought individually or in bulk, and whether the customer feedback was positive, can also be held there; the question is … Should it be?

While collecting and storing sales, marketing and customer information is relevant and important to the management of your business, storing that information in your general ledger is not ideal. So where should this information be kept? In another ledger. Any other ledger.

That way you can structure the data requirements optimally for the user of the information and custom design your reporting output without being limited by the confines of a more rigid financial system. Conversely, the key financial information is not lost in a myriad of data most of which is irrelevant to the delivery on a financial statement, the ultimate deliverable of the general ledger.

There is also a security element to be considered. More people need access to general information than financial information. Staying abreast of current trends and industry standards, you are providing staff with real-time, cloud, mobile access to information.

Does your sales rep, to whom customer feedback is relevant, need access to your entire general ledger on his mobile device? I am sure it would be secured, but again, why put yourself in a position to worry about that when, if you separate the true financial information from the sales and marketing information, the issue becomes moot.

Just because you can use a sledgehammer to knock in a nail, doesn’t mean it is the most practical solution. And just because you can store your information in the general ledger doesn’t mean it is the best tool for the job.

Author: Kevin Phillips CA(SA) is Managing Director of idu Software