Financial dimensions hierarchies – Taking advantage of Organization Hierarchies in Microsoft Dynamics AX 2012-Continued..

Hi Friends,

In one of my earlier posts, I explained in detail about how to create and setup organization hierarchies in Microsoft dynamics AX 2012 and I also highlighted all the benefits which can be derived by using the organization hierarchies at different places in Microsoft dynamics AX 2012.

In today’s post I will explain one of the advantage/benefit which we can derive by using the organization hierarchy in the General ledger module.

In AX 2009 and earlier versions we used to have the dimension set hierarchies to ensure controlling of financial transactions entries in the system. In many situations, it is needed that only a se of financial dimensions are allowed to be keyed in, in a transaction. For example, when Department A is chosen in a financial transaction,  only cost center C1 and C2 can be chosen, but no other cost centers.

This can be achieved by using the organization hierarchies in Microsoft dynamics AX 2012.

Microsoft Dynamics AX 2012

To demonstrate the use of this functionality in AX 2012, I would use the below example.

When Department Administration is entered, then the cost centers Administration(UK) and Administration(USA) should be only allowed and when department Marketing is chosen, then cost center Marketing research(UK) and Marketing research(USA) should be allowed for entry in the financial transactions.

1. The first step involved in this to create the required internal organization hierarchy to represent the overall dimensions hierarchy.

2. Navigate to Organization administration > Common > Organizations > Organization hierarchies for and follow the steps in my earlier post to create and publish the organization structure. Below diagram shows how the organization structure will look like after this is setup.

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3. Once the organization structure is created and published, the next step is use this is the account structures under GL module.

4. Navigate to GL > Setup > Chart of accounts > Configure Account structures, and then select the account structure for which you want to set up the hierarchies.

5. Select the Account structure and click Edit button.

6. Click Relationships button.

7. The Select relationships form shows all the organization hierarchies. Notice that the organization hierarchy which we created above is shown and also system shows all possible combinations of hierarchy values based on the setup done in the hierarchy.

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8. Now that we want to control the entry of the cost centers based on selection made for the department dimension, select the record which shows Party A = Department and Party B = Cost center and click Ok button. Note that you can also select multiple relationships here based on your hierarchy needs.

9. Once the relationship setup is done, Activate the account structure by clicking Activate button.

10. Let us now create and general journal and see the impact of this relationship setup at the account structure level. Navigate to GL > Journals > General journal.

11. Create a new journal and click Lines button.

12. Below diagram shows the account structure we will key in in this financial transaction.

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13. Select a ledger account(Say 401120) and select Department = Administration.

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14. The next segment in the account structure is the Cost center. As soon as you open the drop down for this, notice that system only shows the two cost centers which we have set up in the organization hierarchy. Now, user who is entering the financial transaction, cannot enter erroneous data, as he/she will see only the dimensions which the business wants to be entered. See screen below.

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15. Similarly, notice the the cost centers when we enter Marketing as the Department.

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Simple and easy.

In few of my upcoming posts I will highlight the areas where the organization hierarchies can be leveraged and used. If you have any queries regarding this, please reach out to me.

Till next time !!

Sandeep

Organization Modeling made easy in Microsoft Dynamics AX 2012

Hi Friends,

By this time most of us must be already aware of Organization modeling in Dynamics AX 2012. I just wanted to bring in perception of this functionality.

Microsoft Dynamics AX 2012 brings in another exciting capability which now makes it possible for organizations to manage their organizational structure in more efficient, easy and accurate manner. In AX 2009, it was not possible to define a structure of organizations, as it was possible only to define different company accounts which were pretty much separated from each other.

In reality, different parts of an organization such as legal entities, departments, business units, cost centers, teams etc. work together and are always dependent on each other in some way. Microsoft Dynamics AX 2012 makes it all possible by introducing a very flexible Organization Model functionality.

In today’s post we will take a look at the important aspects of this organization modeling and try to understand how this can help organizations in real-time. To begin with, let us first discuss about the different types of organizations which we can create in AX 2012.

Microsoft Dynamics AX-Powerfully Simple

Organizations:

An organization basically signifies a group of people and resources who work together to carry out a defined business process with a mission. We can create two types of organizations in AX 2012.

  • Legal entities : This is an organization which has a registration with a legal authority and can enter into contracts with customers and are required to produce statements that reports their performance. This is similar to a company account which we used in AX 2009.
  • Operating units: An operating unit is a type of organization that is used to distribute economic resources and business processes of the organization. We can create the following types of operating units in AX 2012 out of box.
  1. Business unit
  2. Cost center
  3. Department
  4. Value stream

Along with these 4 types of operating units, organizations can also create Teams and make it a part of the Organization structure. A team could be referred to group of people who share common responsibilities such as Collections team, AR team, AR team etc..

Organizational Hierarchies:

In AX 2012, we can set up a hierarchy of all the organization types. For example we can create a hierarchy of legal entities for tax and statutory reporting.

We can also create a hierarchy of operating units to report financial information which are required internally within the organization. For example we can create organization purchases to control purchasing policies, budgets and business processes.

An important point to note here is, all the organizations in a hierarchy can share parameters, policies and transactions. The child organizations can inherit and override the parameters of its parent. Also note that, in AX 2012, the globally master data such as address books, currencies etc. cannot be overridden for individual organizations.

To be able to create a hierarchy of organizations in AX 2012, we must first define a purpose of this hierarchy. This purpose would define which types of organizations can be included in the hierarchy. There are various hierarchy purposes available out of box in AX 2012 few of which are procurement control, expenditure control, audit internal control etc. You can find more information when you get hands dirty in the system. I would demonstrate a hierarchy by taking the expenditure control purpose into account.

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To create a new organization hierarchy, navigate to Organization administration >  Common > Organizations > Organization Hierarchies.

Organization Hierarchy

Configure the organization structure with easy steps by selecting organizations and doing drag and drop.

Add organizations to Hierarchy

Please take a look at the screenshot below which shows a sample organization that I have configured.

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Publish the organizational structure changes with tracking dates and complete audit histories. You can also publish the hierarchy for a future date.

Publish Organization Hierarchy

Now that the organization hierarchy has been published and in effect, you can use it for

  • Defining expense, audit and procurement policies using this hierarchy. This will cause the policy to be effective across this hierarchy.

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  • Configure accounting structures and specify organization hierarchy relationships. This will cause to have more control in transaction entry where system will have automatic validations in place for selection of financial dimensions in the transaction line.

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  • Helps in organizational data security by configuring legal entities for user rules.

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The new organization model functionality of AX 2012 allows configuring complex organization models without writing additional code and also allows users to easily restructure, as organizational structure needs changes. Microsoft Dynamics AX 2012 grows as your business grow and needs complex organizational structuring for better and tight financial controlling. This makes AX 2012 simply more powerful.

Let me know if you have any questions regarding the organization modeling in AX 2012. Till next time !!

Sandeep