Xperience

Guest Blog: Hiding Complexity - Dynamics NAV Posting Groups vs Sage 50 Nominal Codes

As a Microsoft NAV consultant, I have always paid great respect to Sage, as it’s a product that has really shaped what the modern accounting software looks like – even to the point that many Sage users take some of Sage peculiarities for granted, and assume that NAV, which is a full ERP system, will behave similarly.

The most common peculiarity is that an experienced Sage user will often demand, or expect, that entities (Customers, Items et) would refer to “Nominal Codes” explicitly. Consequently, at the question “where are my nominal codes?” I am usually forced to launch into a lengthy, and potentially confusing explanation around Posting Groups, and Posting Setups. Not to mention that Nominal Codes are called “G/L Accounts” in NAV, and Suppliers are “Vendors”.

So the answer I learned to give, to get myself out of the trouble of showing a system which seems (and probably is) quite more complex to setup than Sage, is the following: “NAV hides complexity from the user, so even people without deep knowledge of accounting can process business documents without errors, once the system is set up correctly”.

The other side of the coin is that NAV must be set up thoughtfully and properly, before posting any document is even attempted, and the setup must be tailored to the customer’s business, namely his Chart of Accounts, to avoid surprises and frustration.

Posting Groups = Successful Implementation

In general terms, Posting Groups are categories which must be assigned to entities (master data), such as Vendors, Customer, Items.

The minimum set of Posting Groups that must be taken into consideration are:

  • General Business Posting Group: WHO am I doing business with
  • General Product Posting Group: WHAT am I buying or selling
  • Inventory Posting Group: HOW is the value of the goods or services stored in the different locations for the different categories of goods
  • VAT Business Posting Group: WHO am I doing business with, for VAT purposes
  • VAT Product Posting Group: WHAT am I buying or selling, for VAT purposes
  • Customer Posting Group: HOW do I handle the inbound payment flow
  • Vendor Posting Group: HOW do I handle the outbound payment flow

All this categories come together into various Posting Setups (with the exception of the last two listed, that contain the posting rules directly in the table). The minimum subset of posting setup is:

  • General Posting Setup: posting rules guided by the combination of General Business Posting Group and General Product Posting Group
  • VAT Posting Setup: posting rules for VAT, guided by the combination of General Business Posting Group and General Product Posting Group
  • Inventory Posting Setup

Dynamics NAV uses a matrix of posting groups combinations, to post amounts in the various ledgers (G/L Entry, VAT Entry etc) seamlessly, that spares the final user the need to think in financial terms (Nominal Codes aka G/L Accounts) while carrying out daily tasks. The posting is guided by “rules” that refer to the various business parameters or events, related to the documents that are posted, by assigning the entities involved to the correct categories.

Other sets of posting groups are needed for different areas of the system, such as Fixed Assets, Manufacturing, Jobs, but the principle remains the same, and of course, the ones above always come into play when invoicing, whatever module is in use.

Fulfilling business needs

By looking at the Demo Company in NAV, it’s possible to gain an initial understanding of NAV way of thinking, but it is often hard to proceed by asking the customer to categorise his business flow according to NAV groups. What happens usually, is that the consultant must back-track those rules examining the Chart of Accounts.

This exercise can prove challenging, especially when the customer’s accounts structure proves not very “compatible” with the NAV ways, and it always involves multiple sessions and tests to make sure that the system behaves as expected and desired. Often some minor changes in the Chart of Accounts structure are advisable to make the best use of NAV advance capabilities.

At the end of the journey, there is a system that will make all the posting choices, in the background for daily tasks such as invoicing, while still allowing, when necessary, direct control through General Journals and advanced tools, reserved for the more advanced financial roles in the Company.

[Blog Written by Xperience Group Technical Lead Consultant]

About Posting Groups: https://msdn.microsoft.com/en-us/library/hh168345(v=nav.90).aspx

How to configure finance processes: https://msdn.microsoft.com/en-us/library/hh168581(v=nav.90).aspx