Understanding Double Ledger Bookkeeping in Infor M3

Of all the intricacies of business operations, financial management stands as a cornerstone of success. Among the various methods employed to maintain financial integrity, double ledger bookkeeping emerges as a robust method, ensuring accuracy, transparency, and compliance. In this article, we delve into the significance of double ledger bookkeeping, shedding light on its legitimate uses, legal considerations, and the challenges posed by previous limitations in systems like the Infor M3 business engine.

What is Double Ledger Bookkeeping?

Double ledger bookkeeping, also known as double-entry accounting, operates on a fundamental principle: every financial transaction affects at least two accounts. For every debit, there must be a corresponding credit of equal value, ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced. This systematic approach provides a clear and accurate representation of a company’s financial position, enabling informed decision-making and fostering trust among stakeholders.

Legitimate Uses of Double Ledger Bookkeeping

Double ledger bookkeeping is a practice that involves keeping two separate sets of financial records for a business—one set for internal purposes and another set for external reporting, often for tax or regulatory compliance. While this practice can raise ethical and legal concerns if used for fraudulent purposes, it can also have legitimate uses, such as managing international operations or complying with different accounting standards. Here are a few examples of double ledger bookkeeping scenarios:

1. International Operations: A multinational corporation operates subsidiaries in different countries. Each subsidiary maintains its own set of books to comply with local accounting regulations and tax laws. Additionally, the parent company may consolidate financial statements using a different set of accounting standards for reporting purposes.
2. Tax Reporting: A business maintains one set of books for internal management purposes, tracking revenues, expenses, and assets. However, for tax reporting purposes, the company may keep a separate set of books to comply with tax regulations and optimize tax planning strategies. This can involve adjustments for tax deductions, credits, and other incentives.
3. Regulatory Compliance: Financial institutions, such as banks or investment firms, are subject to strict regulatory requirements. They may maintain one set of books for internal management and risk assessment and another set of books for external reporting to regulatory authorities, such as the Securities and Exchange Commission (SEC) or the Federal Reserve.
4. Consolidation of Financial Statements: A holding company owns multiple subsidiaries in different industries. Each subsidiary maintains its own set of books to track financial performance. However, for consolidation purposes, the holding company combines the financial statements of its subsidiaries to present a comprehensive view of the group’s financial position and performance to investors and stakeholders.
5. Contractual Obligations: In some cases, businesses may be required to maintain separate sets of books as part of contractual agreements with partners, investors, or lenders. For example, a joint venture partnership may require each party to maintain separate accounting records to track contributions, expenses, and distributions.

Compliance and Legal Considerations

While double ledger bookkeeping offers numerous benefits, it also comes with legal considerations that businesses must address:

Compliance: Businesses must adhere to accounting standards and regulatory guidelines governing financial reporting and disclosure to ensure the accuracy, completeness, and transparency of financial information.

Data Privacy and Security: Protecting sensitive financial data is paramount. Businesses must implement robust data privacy and security measures to safeguard against unauthorized access, breaches, and data theft.

Audit Trails: Maintaining comprehensive audit trails is essential for traceability and accountability. Businesses should document all financial transactions, including supporting evidence and explanations, to facilitate audits and investigations.

Improved Functionality to Manage Corporate Accounting in Infor M3 ERP

In the past, businesses encountered challenges with legacy systems like the Infor M3 business engine, which lacked the capability to fully support the automation of double ledger bookkeeping. These limitations hindered the accuracy, efficiency, and reliability of financial processes, posing significant risks to businesses:

• Limited Flexibility: Legacy systems often lacked the flexibility to accommodate evolving accounting standards and regulatory requirements, resulting in manual workarounds and inefficiencies.
• Insufficient Integration: Integration issues between disparate systems made it challenging to synchronize financial data, leading to discrepancies and inconsistencies in reporting.
• Inadequate Controls: Weak internal controls and audit trails increased the risk of errors, fraud, and compliance violations, undermining the credibility of financial information.

Since then, the Corporate Accounting Program in M3 (Corporate Accounting  – GLS080) has gained functionality to support the automated processes required to adequately conduct double ledger bookkeeping. Under Settings > Corporate Accounting, users can specify overall settings and choose whether to activate the functionality for managing corporate accounting and reporting. This setting determines whether the program will be used to manage accounting data according to different reporting frameworks. The functionality is explained below:

• Users can select one balance key to be used specifically for each non-common accounting ledger. This includes the corporate ledger and two additional ones.
• Each balance key corresponds to a specific accounting ledger and is used to record account balances within that ledger.
• For each accounting ledger, users can select a period type different from the one specified for M3 Financial Management in the Company
• This allows users to define the period type (e.g., monthly, quarterly) for financial reporting purposes independently for each accounting ledger.

It is also worth noting that the local accounting ledger consists of all balance keys specified in the GL Balance File. This ensures that the local accounting ledger includes all relevant balance keys except those explicitly designated for other accounting ledgers.

Wrap Up 

Overall the new settings in the Corporate Accounting program provides users with the flexibility to customize settings for managing accounting data across multiple ledgers. By activating the functionality and specifying balance keys and period types for each ledger, organizations can effectively record and report financial information according to different reporting frameworks.

Need help navigating double ledger bookkeeping in M3 or considering what’s the best corporate accounting and reporting solution for your business? Fill out the contact form to meet with us and discuss this opportunity further.