Accounts Streamlining

What is Master Data?

In all business processes, we have entities that play a crucial role in our business. These entities are known as master data and many companies today suffer because of improper master data. So what are these ‘Masters’?

Masters are what we get when we ask, ‘With whom do we do businesses? - Our customers and suppliers; ‘With what?’ - As in what do we transact with - services and inventory and ‘Using what?’ – give us taxes and currency. These are what we call the ‘Masters’.

What do we do with Masters? We transact – sales, purchases, receipts, payments - these are the ‘Transactions’ records of the business activities we perform.

Both Masters and Transactions are defined by business practices and not by software. What is important is in the way these interactions are recorded, managed and reported upon.

Why do I need one?

Having a master is inevitable, its management is even more crucial as it is used by multiple applications. Even a single error in master data can cause errors in all the applications that use it. For example, an incorrect address in the customer master might mean orders, bills, and marketing material sent to the wrong address. Similarly, an incorrect price on an item master can be a marketing disaster, and an incorrect account head leads to wrong accounting. So with your master down, your business pretty much becomes a pack of falling cards.

Following are the Masters that should be configured properly in Accounting Package including Tally:

• Customer Master

• Vendor Master

• Payroll Master

• Value-added tax Master

• Inventory Master ( Item Master)

Let us look at Inventory Master in detail:

The main concepts of trading activities are receipt of goods and delivery of goods. We generally call them purchase or sale actions. The trading items can be raw material, finished goods, semi-finished goods etc..

For better Organisation, let’s have groups and sub-groups for classification of the trading item. You can create the inventory from this menu, which contains the following options:

1. Stock Group: Create your group here, for example, raw materials, goods etc

2. Stock Items: Create your items here, for example, TV, VCD, etc.

3. Vouchers

4. Unit of Measurement: Some examples include Ltr, M, Pcs etc.

5. Quit: Exit from the menu.

Before creating the Inventory info menu, we should know what stock groups, stock items and units of measurement are. What are Items, Groups and Units?

Stock Items and Stock Units in Tally

Stock Items: Stock items are the key inventory entities, like Ledgers In fact, you need to create a stock ledger account for each item and Tally.ERP calls this account ‘Stock Item’.

Stock Units: You can measure the Stock Item by Units such as Ltrs, M, Kgs, Pieces, Box and so on.

Item master is key for any business. If item master is not configured properly then the report and the accounting will not show the accurate details/reports of the company. Different businesses have different requirements and therefore the classification needs to be customized for your business.

With the right Item Master, you have:

• Better inventory management

• Proper analysis and decision making

• Timely replenishment

• Correct invoicing and accounting

Benefits of Proper Master Data Management

One of the core principles that your ERP works on is that the software centralizes information into a common database. Integrating and centralizing data allows companies to do away with ‘standalone information’. Consolidated data allows key decision makers to refer to a single system when it comes to business data. Integrating data also serves to promote efficiencies throughout the enterprise. For instance, by enabling sales the ability to access information about product, order schedules and purchasing, sales employees are able to handle customers better. Increasing customer satisfaction through increased operational visibility is one of the underlying goals of all ERP systems. Creating a Master is the first step in the process.

Problems due to non-configuration of Masters

Now, let’s look at the chaos that ensues when the Masters are not configured properly.

• Duplicate item codes in masters resulting in inaccurate booking or booking in multiple heads for the same item.

• Different item codes for purchases and sales means no linkage of inventory flow

• No control over the stock

• Pile-up of idle item codes

• Management not having the complete information about the customer or vendor can result in waste of time and delay in work flow.

• Usage Excel for payroll and Payslips generation, resulting in unmanageable information.

Next issue, we will share yet another important lesson in accounts streamlining. Let’s keep learning!