By Ross Garrett (Managing Partner)
If you think the answer is, “Yes, Workday has gotten rid of subledgers,” you may be technically correct, but as I like to say being technically correct is the worst kind of correct. Being a consultant who primarily helps live Workday Financials customers (or those who are very close to deploying) discussing how companies handle Workday’s new approach to the subledger concept is the first, and often most important, discussion we have about maintaining a well-functioning system.
What’s better about a subledger in Workday?
So first to get our terminology straight Workday prefers to call their new concept operational ledgers. We will discuss how they have improved the old concept. In Workday any activity that occurs in an operational ledger (accounts payable (AP), accounts receivable (AR), assets, etc.) is also instantly reflected in the general ledger. There is no batch processing and transactions from the operational ledger are always instantly linked to the general ledger. This means your data is always real time, and it is a great improvement for the speed you can see changes made during a month end close.
What is the risk of subledgers/operational ledgers in Workday?
Even though entries post in real time it is still possible to have the general ledger balance in an account not reconcile to the support found in the subledger. Common ways that this happens:
- Booking a manual journal to a subledger account like AP. Unless you also do a transaction in the invoice side of the system the operational ledger will come out of sync with the GL.
- Manual asset registration does not create an accounting entry in the general ledger. A manual journal entry would need to be booked as well.
- For cash accounts you book manual journal entries rather than using ad hoc bank transactions.
There are many other scenarios that can happen, but those are three of the most common mistakes.
How can I mitigate my risk?
Workday has done a great job of providing reports that reconcile operational ledgers to the general ledger. Almost all of them have the name ‘reconciliation’ in the title if you do a search in Workday. I recommend you run these with every month end close. In addition, you should make sure that control accounts like AP, Cash, AR, construction/work in progress, assets, etc. all are either marked as control accounts are have custom validations that prevent manual journal entries from being booked. This preventative control should stop problems at the source, and spark conversations about the proper alternatives to journal entries.