Financial Consolidation Tools for Microsoft Dynamics AX

In this article, modern financial consolidation solutions for Microsoft Dynamics AX customers will take center stage, with an in-depth look at primary features and functionalities.By ShriShail Technologies Pvt.Ltd.

Financial Consolidation Tools for Microsoft Dynamics AX-

There is a population of Microsoft Dynamics AX users out there who are responsible for parent company financials consolidations of multiple subsidiaries.  Bringing together organizationaldata from a number of legal business units, especially if there are different currencies involved, can be challenging without a powerful financial reporting writing and consolidations tool.  As data grows in size and importance to decision-making for roadmap planning, executives are looking for a business user friendly solution for the routine task of consolidating information into a singular set of financial reports.  If you are responsible for aggregating subsidiary data with Dynamics AX, this article will discuss the options you have that will bring together ease of use, modernity, and power.

  

                              

Let’s start with the definition.  Financial consolidation refers to combining and reconciling transactional and operational data into unified financial reports for the parent company.  These reports combine subsidiary data that make up the parent company’s overall financial health in a straightforward statement.  Consolidations often involve eliminations of inter-company transactions, currency conversions if diverse currencies are involved, and any added adjustments that have to be performed manually in Dynamics AX or directly within the financial consolidation solution in order to achieve a complete picture of the parent company.  This is a great time to look at today’s consolidation software for multiple reasons, but two might stand out for a lot of companies.

Two basic reasons to shop for an automated, modern consolidation tool involve age.  Some companies are ready to get rid of older consolidation software that is too simple for modern business needs, like FRx, Management Reporter or Prophix.  Others would like to retire their older tools are that are too complex for business end users to manage, like Hyperion or Cognos.  There are also Dynamics AX customers that implemented the native consolidation module that came with AX2012 – and simply found it to be too cumbersome or not able to meet their needs.

Recently, I spoke with a controller who relies on Dynamics AX to oversee multiple subsidiaries around the globe for a multi-national parent corporation.  This controller is charged with meeting domestic and global standards, in addition to currency conversions, like the International Financial Reporting Standards (IFRS) to Generally Accepted Accounting Principles adjustments (GAAP), commonly referred to as IFRS to GAAP.  Some consolidation tools provide flexible sub-ledger analyses and are part of a comprehensive Business Intelligence (BI) suite, completely integrated with other solutions like ad-hoc reporting, budgeting, forecasting, modeling, data visualizations, and BI data storage.  Let’s drill down into what financial consolidations look like for Dynamics AX customers, including what you should know when considering solutions to best meet your company needs.

This blog has covered data integration methods before, but it is your call whether you pull data live from AX with a potentially slower real-time analysis, depending how many users are querying data from the AX server – OR you can rely on the higher performance integration that a BI data store offers, but it will involve regular replication of your data to an online analytical processing (OLAP) cube or a data warehouse.

Companies with less subsidiaries to consolidate, with little or no currency conversions necessary, and/or without the concern of a sluggish AX server due to substantial and sometimes simultaneous data queries would probably do very well with a live integration.  Furthermore, if you don’t plan to bring in other data sources, don’t need to post elimination entries or other adjustments beyond what AX offers, you can just stick with Dynamics.  On the other hand, plenty of OLAP cubes and data warehouses host consolidations by bringing GL information directly from AX, so this is a helpful alternative for organizations with different demands.  Sometimes, subsidiaries running other ERP systems are acquired and even if there is a future plan to move them over to AX, they need to be consolidated from the time they are acquired, and this is possible with the most specialized consolidation solutions.

Replicating your data to an OLAP cube or a commercial data warehouse is easy with scheduled, regular refreshes, or you can manually push a button.  AX data will replicate, typically with Microsoft SQL Server Integration Services (SSIS), to the BI data store, and consolidations can be performed at a higher performance because of the stability of an OLAP cube or a data warehouse.  If you have more complex currency conversions to perform, have concerns about the sluggishness of the AX server with your regular data queries, and/or if the amount of data you need to consolidate is substantial, a BI data store will serve you the best.  You’ll additionally want to evaluate which of today’s consolidation functionalities are requisite for your particular business demands.

Intercompany eliminations.  Here and there, one subsidiary might buy or sell goods or services to another subsidiary, which means both line items cancel each other out for both entities.  Intercompany eliminations cancel out and remove these exchanges from the P&L and balance sheet, and this can be performed within Dynamics AX or a BI data store, via the tool you implement.  Some BI software even come equipped with fully configurable Excel or web input forms that you can use to manually adjust or eliminate transactions in business user friendly ways.

Currency conversions and consolidation adjustments. Currency conversion enables international companies to consolidate their transactional data into unified financial statements in a single currency through this function.  Consolidation adjustments, including IFRS to GAAP, help professionals meet national and international accounting rules, update inventory, or temporarily correct incomplete subsidiary information, amongst others.  These are simple functions that assist you when completing statutory statements.  And there are more user-driven elements.

Allocations, reconciliations, and modeling organizational changes. Some organizations opt to allocate particular expenses or revenues to a department, a division, and/or a specific subsidiary.  You can perform these allocations within AX, before loading data to a BI solutions, or within some data warehouses and OLAP cubes, you can design allocation processes of various complexity levels.  Should you decide that the BI data store option is best for your needs, plenty of organizations prefer to have subsidiary or parent company staff reconcile the information to ensure accuracy, which can be completed with AX, a BI front-end software, or in the BI data store.  And finally, some data sources allow you to perform some modelling by replicating and alternating however many company trees or hierarchies necessary to see the impact of acquisitions, divestments, and/or reorganizations.  You can visualize the effect of particular changes on the parent company portfolio with this functionality.

There are plenty of aspects to consider when shopping around, due to the complexity of consolidations.  Solver, Inc. is happy to answer questions and generally review BI360’s easy-to-use, Excel-powered consolidation tool for Microsoft Dynamics AX with both real-time or data warehouse integrated analysis, comprehensive reporting and collaboration as a way to accelerate company performance management.

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Microsoft Dynamics AX Implementation Guide - Configuration data management

This article is excerpts from latest book Microsoft Dynamics AX Implementation Guide by  Yogesh Kasat and JJ Yadav , about one of the important topic in Microsoft Dynamics AX implementation process—configuration data management.

The configuration of an ERP system is one of the most important parts of the implementation process. Configuration means setting up the base data and parameters to enable your product features such as financial, shipping, sales tax, and so on.

Microsoft Dynamics AX Implementation Guide-

Microsoft Dynamics AX has been developed based on the generic requirements of various organizations and contains the business processes belonging to diverse business segments. It is a very configurable product that allows the implementation team to configure features based on specific business needs. During the project, the implementation team identifies the relevant components of the system and sets up and aligns these components to meet the specific business requirements. This process starts in the analysis phase of the project carrying on through the design, development, and deployment phases.

Configuration management is different from data migration. Data migration broadly covers the transactional data of the legacy system and core data such as Opening balances, Open AR, Open AP, customers, vendors, and so on. When we talk about configuration management, we are referring to items like fiscal years and periods, chart of accounts, segments, and defining applicable rules, journal types, customer groups, terms of payments, module-based parameters, workflows, number sequences, and the like. In a broader sense, configuration covers the basic parameters, setup data, and reference data which you configure for the different modules in Dynamics AX.

The following diagram shows the different phases of configuration management:

In any ERP implementation project, you deal with multiple environments. For example, you start with CRP, after the development you move to the test environment, and then training, UAT, and production, as shown in the following diagram:

One of the biggest challenges that an implementation team faces is moving the configuration from one environment to another. If configurations keep changing in every environment, it becomes more difficult to manage them. Similar to code promotion and release management across environments, configuration changes need to be tracked through a change-control process across environments to ensure that you are testing with a consistent set of configurations.

The objective is to keep track of all the configuration changes and make sure that they make it to the final cut in the production environment.

The following sections outline some approaches used for configuration data management in the Dynamics AX project.

The golden environment

An environment that is pristine without any transactions—the golden environment—is sometimes referred to as a stage or pre-prod environment. Create the configurations from scratch and/or use various tools to create and update the configuration data. Develop a process to update the configuration in the golden environment once it has been changed and approved in the test environments.

The golden environment can be turned into a production environment or the data can be copied over to the production environment using database restore.

The golden environment database can be used as a starting point for every run of data migration. For example, if you are preparing for UAT, use the golden environment database as a starting point. Copy to UAT and perform data migration in your UAT environment. This would ensure time you are testing with the golden configurations (If the configuration is missing in the golden environment, you would be able to catch it during testing and fix your UAT and the golden environment too).

The pros of the golden environment are given as follows:

·         The golden environment is a single environment for controlling the configuration data

·         It uses all the tools available for the initial configuration

·         There are less number of chances for corruption of the configuration data

The cons of the golden environment are given as follows:

·         There is a risk of missing configuration updates due to not following the processes (as the configuration updates are made directly in the testing and UAT environments).

·         There are chances of migrating the revision data into the production environment like workflow history, address revisions, and policies versions.

·         There is a risk of migrating environment-specific data from the golden environment to the production environment.

·         This is not useful for a project going live in multiple phases, as you will not be able to transfer the incrementalconfiguration data using database restore.

·         You must keep the environment in sync with the latest code.

Copying the template company

In this approach, the implementation team typically defines a template legal entity and configures the template company from scratch. Once completed, the template company's configuration data is copied over to the actual legal entity using the data export/import process.

This approach is useful for projects going live in multiple phases, where a global template is created and used across different legal entities. Whereas, in AX 2012, a lot configuration data is shared and it makes it almost impossible to copy the company data.

Building configuration templates

In this approach, the implementation team typically builds a repository of all the configurations done in a file, imports them in each subsequent environment, and finally, in the production environment.

The pros of building configuration templates are as follows:

·         It is a clean approach.

·         Utilize DIXF, DAT/DEF files to export the configuration and import them into a new environment.

·         You can version-control the configuration file.

·         This approach is very useful for projects going live in multiple phases, as you can import the incremental configuration data in the subsequent releases.

·         You can create additional code to automate export and import process or utilize LCS Configuration manager tool to export and import configuration from one environment to other.

This approach may need development efforts to create the X+ scripts or DIXF custom entities to import all the required configurations.

Summary

Clearly there are several options to choose from for configuration data management but they have their own pros and cons. While building configuration template is ideal solution for configuration data management it could be costly as it may need significant development effort to build custom entity to export and import data across environments. The golden environment process is widely used on the implementation projects as it’s easy to manage and require minimal development team involvement.

About Microsoft Dynamics AX Implementation Guide

ERP implementations are complex by nature and just like configuration data management has so many moving part. In order to make implementation project successful project managers, solution architect and leaders are expected to know all the aspects.

The book Microsoft Dynamics AX Implementation Guide is one of the first books covering the entire Dynamics AX implementation lifecycle with real life learnings and examples, providing stage by stage or phase by phase instructions for Project Managers, Business users and Solution Architects.  Supported by practical examples to validate recommendations and common pitfalls.

This book provides a summary of the various facets for running a successful Microsoft Dynamics AX project without going through expensive and time consuming training courses. Aspects covered include: Management, Functional/Business analysis, Technical design with code examples, and Infrastructure.