Is this the end to Financial dimensions in D365FO as we know them?
Is the new 10.0.32 feature Financial tags going to make it easier to
- set up, use, and maintain Financial dimensions in Dynamics 365FO?
- to track ledger and subledger transactions?
At least, Microsoft claims so: “Financial tags let organizations track user-defined fields on accounting entries posted to the general ledger. This eliminates the need to create financial dimensions that contain values that are not reusable. Additional financial dimensions increase the size of an organization's chart of accounts, causing a negative impact on system performance during processes such as the year-end close. The financial tag values can be used for reporting purposes or ledger settlement. For example, you can create a financial tag to track payment references used for ledger settlements, making it easier to match transactions.”
- The trouble with Financial dimensions
- Cost accounting anyone
- Introducing Financial tags
- Differences and similarities between financial tags and financial dimensions
- Financial tags are great news
- Learn more about Financial tags
The concept of Financial dimensions is a very important area, from project inception thru implementation and beyond. Some, if not most, of the decisions made in the gap-fit analysis and other workshops with customers will have life-long impacts – at least for the D365FO installation.
Financial dimensions, when used properly, can do wonders for cost allocation, approval workflows, reporting & financial analysis, and more.
In my experience, customers easily get carried away with all the nice allocation, control, and analysis possibilities. “The sky is the limit”. This is an area where I often get into some interesting discussions, to say the least.
As a consultant and trainer with the D365FO/AX family for the last 25 years, I often challenge the use of financial dimensions. Does it really make sense to have 8-12-20 financial dimensions in use in the up-front daily accounting if it is only used for reporting & financial analysis at month-end?
Microsoft again: “Additional financial dimensions increase the size of an organization's chart of accounts, causing a negative impact on system performance during processes such as the year-end close.”
Also, the usual load of Account structures, even with well-applied Advanced rules, can be a nightmare to maintain.
And once live, we need to address the handling of the financial dimension values. Even Microsoft admits that “The creation and validation of unique financial dimension values is a costly operation”. The upcoming Financial dimension service might help, but only for the values.
I really prefer to get it right – or as good as possible – upfront; to me, fewer is better when it comes to financial dimensions. It can be quite tricky to change the setup of Financial dimensions in a production environment and also implement the changes in the business procedures. Changing habits from the shop floor and up to C-level is not always an easy undertaking.
Why Financial tags – short version
Financial dimensions should never be used to track non-reusable values, such as document numbers or reference numbers. It adds to the set-up and value maintenance workload and could really affect performance, like during the Year-end close. So think Financial tags from now on! That would also allow you to edit the value after posting – not possible with financial dimension values.
When the revamped Cost accounting module was introduced, I really thought it would make it big.
Quoting myself from my blog post Cost Accounting in Microsoft Dynamics 365 for Finance and Operations” from way back when:
- “If the primary purpose of a financial dimension is to drive cost and profitability analysis, the new tools in Cost Accounting would get the job done – and probably be much better at it. It has such a rich toolset, not available anywhere else in D365FO.”
Much to my disappointment, Cost accounting isn't widely used by customers.
“The Financial tags feature eliminates the need to use document numbers, descriptions, or financial dimensions by letting an organization create and enter up to 20 user-defined fields on transactions. Those fields are then stored on the accounting entries that are created for the transactions. Tag values aren't stored in subledger tables, the Customer transactions, or the Vendor transactions table.
Tags are introduced in the 10.0.32 release of Dynamics 365 Finance. This release supports the capability to define up to 20 user-defined tags and to enter tag values on the following journals (and corresponding Open Data Protocol [OData] and Data management entities):
- General journal
- Global general journal
In each new release, tags will be implemented in additional journals, documents, and processes.” [Microsoft]
Already the 2023 Release wave 1 mentions several new features involving Financial tags:
- Define financial tags to support analytical reporting and business rule automation
- Financial Analytical Reporting
- Additional areas for financial tags usage
- Further automate ledger settlement
Upcoming features always allow for some speculations: Is it going to happen, when, and not least, what is in it for me?
Perhaps I could even rewrite one of the blog quotes from above: “If the primary purpose of a financial dimension is to drive cost and profitability analysis, the new tools
Cost accounting Financial tags would the job done – and probably be much better at it. It has such a rich toolset, not available anywhere else in D365FO.”
I don't care much about the name of the tool as long as it gets the job done – and preferably better than the tool that it replaces or at least supplements. And the Financial tags feature does look promising, especially once the additional features are available, like default values, etc.
So, it is not the end of Financial dimensions. But it will make a very welcome supplement. Indeed making it easier to
- set up, use, and maintain Financial dimensions themselves in Dynamics 365FO
- track non-reusable values without the overhead of Financial dimensions
- track ledger (and subledger transactions in due course)
- automate ledger settlement
- do advanced Financial Analytical Reporting.
The setup is structured, and the use is structured.
To make financial dimension values available for transactions etc., they must be added to the parent Financial dimension itself before use. To be able to use the financial dimension values, in transactions et., the Financial dimension must be found in an active Account structure – as a segment or in an advanced rule – in the Legal entity.
The Financial dimension must be entity-backed (Shared or legal entity specific) or Custom (always Shared):
Dimensions can be activated only when the system is in maintenance mode, and they cannot be deactivated.
Dimension values cannot be edited on posted transactions.
Financial tags have limited structure, no validation is done, and very limited defaulting is done – at least at the moment (version 10.0.32).
They can be deactivated at any time.
Tag values on transactions can be edited at any time, also after posting. An audit trial is maintained (fortunately!).
Like financial dimension values, tag values are stored on the accounting entries that are created for the transactions. However, tag values aren't stored in any subledger tables, such as the Customer transactions or Vendor transactions table. I would expect the subledger Financial tags to be added fairly soon, however.
Both financial dimensions and financial tags can be used for analytical reporting and also for some processes, such as ledger settlement.
Neither Financial dimensions nor Financial tags can be deleted. Actually, a Financial dimension can be deleted, but just until it has been put tu use (being referenced like in a posted transaction).
I don't get carried away easily, and certainly not by shiny new objects in a Microsoft release wave announcement. But the core Financial tag feature is already here. So this does look great, and it does look like, it is all going to happen – and soon.
I will make sure to include this in any new project workshops! It will help reduce the number of Financial dimensions, I think. What do you think – please comment below!
Microsoft has some good information here: Financial tags. Be sure to study that, also the detailed list of Differences between financial tags and financial dimensions. Much more detailed than my heads-up above.
Join me in my recorded webinar Dynamics 365 Finance: 7 Key New Features Coming In 2023 Release Wave 1, where I detail more about Financial tags – including further readings – and 6 other key new features.
All our recorded and upcoming webinars are available here.