The Basics of GL Coding - Mihlfeld & Associates Blog

A General Ledger Code (GL Code) is a string of alphanumeric characters assigned to each financial entry in an organization's ledger. ALogisticsServices&TechnologyCompany AboutM&A WhoisM&A TransportationManagement InvoiceProcessing Technology ContinuousImprovement ClientSuccessStories Careers Solutions FreightRater InvoiceCenter RFQManagement ClaimsCenter Connect Login BetaWebsite Carrier Client Supplier TheBasicsofGLCoding Postedby Mihlfeld&AssociatesonNov20,20187:45:00AM FirstofAll-WhatisaGLCode? AGeneralLedgerCode(GLCode)isastringofalphanumericcharactersassignedtoeachfinancialentryinanorganization’sledger.AGLCodecanindicatebasicinformationsuchasadebitorcreditbylocationorprovidehighlyspecificdetailsaboutanentrythroughaGLString.AGLStringismadeupofacombinationofnumbersandgroupsofnumbersthatwhenapplieduniformlycancategorizeeverypointofinformationforanentry. TherearevirtuallynolimitstohowdetailedaGLstringcanbe–itisuptoyourorganizationtodecidethebestpracticesforGLCoding.BelowaresomecommonGLCodingpracticesandtipstokeepyourAccountsPayablesandReceivablesfrom losingtheirmindsinthecomplexitiesofaccounting. GLCodingHelpsBigData OneofthegreatbenefitstousingauniformGLCodingsystemistheextremelyquickdataanalysisandreporting.Ifyouneedtoknowexactlyhowmuchwasspentonrawmaterialsataspecificlocationoverthecourseof14months,youmerelyhavetosearchforthecorrespondingGLCodeandeverytransactionmeetingthoseparametersisinstantlyvisible. Ifyouneedtocompareoneofyourlocationstoanotherlocation–simplypulluptheGLCodesforeachlocationand comparethedata.Useofbigdataapplicationshasincreased17%since2015,(Forbes);theeasieritistosort,analyze,anddisplaydata,thebetterpositionedyourcompanyistomakeinformeddecisions. OneCodeFitsAll Fromthebeginning,itisimperativetoleaveroomforyourGLCodingsystemtogroworshrinktomeetfutureneeds.IfyouareimplementingaGLCodingsystemforthefirsttime,thebestfirststepistooutlinethecurrentAccountsPayableandReceivableprocess. Startwithacompleteunderstandingofwhatyouarecurrentlydoing,whatyouneedtodo,howtheprocesswillchange,andwhoisresponsible.Onceallofthatisknown,theplantoimplementtheGLCodingprocesscanbecreated. Whatpointsofinformationdoyoucapturenow,andwhichpointsofinformationdoyouignore?CanyouforeseeanyscenariointhefuturewhereyouneedtocapturemoreorlessinformationfortheGeneralLedger?ThisisthemostimportantstepincreatingtheGLCodestringyourorganizationwilluse.ThiswillmakeperfectsenselaterwhenwebreakdownarealGLcodetogiveanaccurateexample.Commonpointsofinformationorganizationschoosetocaptureinclude,butarenotlimitedto: Item Customer Vendor ManufacturerLocation Project MethodofShipment Whethertheseparticularpointsofinformationareimportanttoyouornot,rememberyourimaginationisthelimitwhenitcomestowhatyourGLCodestringcanencompass.TakealookatthefollowingGLCodetoseethepathoneclienttookandhowithashelpedthemtrackimportantdata. BelowisanexamplebreakdownofaGLCodeStringusedbyalawnmowermanufacturer: Intheaboveexample,youcanseetheGLCodestringsaretheexactsamelengthbutgiveverydifferentinformation.Beforethefirstcodeiseverapplied,thecadencehastobedecided.Eachsectionmustalwaysportraythesamekindofinformation.Iftheitemisindicatedbythefirstsection,itmustalwaysbeindicatedbythefirstsection.If“2”isusedtomeanHomeDepot,asthefirstnumberofthethirdsection–itmustalwaysbeusedtomeanHomeDepotwhenplacedinthesamespot.  AddingNewInformationtoaGLCodeString Itisimportanttohaveoneormore(dependingonsize)specialistswhooverseeallGLCodingoptionsaseveryoneintheorganizationhastouseastandardizedGLCodeforthedatatobeaccurate.Let’slookatafewscenariosthatwillrequirechangestotheGLCodingString. Scenario1 YouhaveundergonetheexhaustingtaskofdecidingwhatinformationyourGLCodeStringwillcapture,theformat,andhowallofyourexistinginformationwillbecoded.Youbeginapplyingyourcodetoalltransactionsandeverythingisworkingwonderfully.Yourdataiseye-opening,yourfinanceshaveneverlookedmoreorganized. However,fourmonthsafteryoursystemwasputinplace,yourorganizationisshuttingdownadistributioncenterinOklahomaandopeninganewoneinMissouri.Thischangeisassimpleasjustcreatinganewidentifier(definednumericcode)fortheMissouriDCandputtingitinusewhentheswitchismade. IttrulyisthatsimpletoimplementnewGLCodesintoyourcompany'sdatabase. Scenario2 TheCFOlovesthenewGLCodeStringandwantstopushitfurther.Shecanpreparecertainreportsfasterifshehasquickeraccesstodatathatisn’tcapturedbythecurrentGLCodestring.YourGLCodehasalwaysfollowedthesameformat,forexample,(xxx-xxxx-xxx).Itiseasytoaddanadditionalsectiontoindicatemoreinformation. Youmayhavetomakesystemspecifictweaks,butchanginganexistingformatfrom(3numbers–4numbers–3numbers)toaddonemoresectionofnumbersontheendisassimpleasjustdoingit.Again,you’llhavetoreviewallofthecurrentpossibleoptionsforthatdataandapplyastandardcode.ThatisthemosttimeconsumingpartbuttheultimateconvenienceoftheGLCodewillfaroutweightheinitialinconvenience. Whataboutthetransactionsbeforethisnewsectionwasrequired?Ifyoursystemrequiresyoutohaveeverysinglecodethesamelength–themostcommonsolutionisretroactivelyadding-0000toallofthecodesthatexistedbeforethischange.Thatwaythecodemeetstheformatrequirements,buttheentryof0000doesn’tactuallyindicateanyinformation.Theuseof0inaGLCodeshouldalwaysindicatenoinformationunlessbeingusedasaplaceholder,suchas:001,002,003,etc. AutomatingtheGLCode Everyoneknowsapersonintheofficewhotakestheir10-keyskillsseriously.Accountspayableandreceivablefolkscanmakemusicwiththeir10-keys,theyaresopracticed.However,whenfacingaGLCodeof8,12,16,oreven32characters,thereareonlysomanytransactionstheycancodeinanhour. WithalltheresponsibilitiesyouraccountantshavetobeginwithitisimpossibletofindthetimetoGLCodeeveryinvoice.Whatisnextthen,hiringstaffjusttoGLCodeallday?GLCodingwassupposedtosaveyourorganizationtimeandmoneyonthereportingsideandnowthatisbeingedgedoutbyneedingadditionalhumancapital. Theanswer:automatetheGLCodingbyautomatingyourinvoiceprocessing.Thereareamultitudeofsoftwaresolutionsouttherethatspecializeininvoiceprocessing.Theyaremostlyaffordable,high-quality,andeasytouse.Manyworkbyallowingyoutoscaninvoicesinandtheypickupinformationpoints.Othersrequireentryofcertaininformationpointsandthenitautomatesmanytasksafterinyoursystembasedonthedataentered. MoresophisticatedsolutionssetupEDI(ElectronicDataInterchange)orAPI(ApplicationProgramInterface)connectionsbetweenyoursystemandyourvendorsallowinginvoicestobeautomaticallyenteredelectronicallythroughasecuredfeed.Holisticsolutionsincludealloftheaboveandmayevenuseoutsourcedhumancapitaltoassistyourorganization.Therearemanycompanieswhoemploygreatsoftwareandpeopletomanageyourentireinvoiceprocessingneedswithyou. GLCodeSpecialization&Conclusion Likeanything,GLCodesandinvoiceprocessingasawhole,canbe100%specializedtofityourneeds.Theeraoftechnologyisuponusandtestingunlimitedpossibilitieshappensatcompanieseveryday.Theinformationaboveisintendedtoonlyprovideabeginner’sviewofhowGLCodingworksandhowitisapplicableacrossallorganizations.IfyouaresearchingforaGLCodingSolutionoranInvoiceProcessingSolutionitisbesttostartwithofferingsthatarespecifictoyourindustryoryourneeds. Accountingneedsarethe5thmostoutsourcedbusinessfunctionaccordingtoajointpollfromthewebsitesEntrepreneurandInvestopedia.Thereisnothingwrongwithfocusingonthemissionthatisthecoreofyourbusinessandoutsourcingsomeservicestospecialtyfirms. LastUpdated:3/27/19 Topics: InvoiceProcessing, Technology, GLCoding RecommendedForYou Mihlfeld&AssociatesisaLogistics&TechnologyCo.  Wespecializeincustomsolutionsfortransportationmanagement,software,costreduction,invoiceprocessing,andmuchmore.Inshort,weexisttosaveyourcompanymoneyontransportationandlogistics.Wehopethisbloghelpsyouinyourjourneytowardbettertransportationpractices. WelcometotheMihlfeldMile. RecentPosts PostsbyTag LogisticsManagement(27) Insider(19) 3PL(16) COVID-19(14) Shipping(14) Economy(12) FreightRates(12) CostReduction(8) ContinuousImprovement(6) Outsourcing(5) 2021(4) Holiday(4) LogisticsTechnology(3) CarrierCompliance(2) FuelSurcharges(2) InvoiceProcessing(2) TMS(2) Technology(2) Automation(1) CIP(1) GLCoding(1) JoeBiden(1) KPI(1) Seeall   AboutM&A WhoisM&A LogisticsManagement InvoiceProcessing Technology ContinuousImprovement ClientSuccessStories Careers Solutions FreightRater InvoiceCenter RFQManagement ClaimsCenter Resources Blog CaseStudies ContactUs   FollowUsonSocial!          ©2018Mihlfeld&Associates,Inc. CoreLogixtmandTime21tmaretrademarksofMihlfeld&Associates,Inc.AllRightsReserved. PrivacyPolicy  | TermsofUse | ContactUs