Introducing Corporate Allocations

Corporate Allocations is a powerful tool that allows you to manipulate existing ledger transactions to generate new transactions. You can use it to split or reassign expenses and other transactions using predefined criteria. You can allocate amounts across periods, accounts, analysis codes and business units. The charges can be split, increased or decreased.

Corporate Allocations generates and posts ledger transactions, so you could achieve the same result by entering a manual journal using Ledger Entry. However, by using Corporate Allocations you can automate the apportionment process and repeat it each period, or as often as you require.

You might use corporate allocations to:

  • apportion costs, for example as in activity based costing - ABC
  • post amounts across business units, for example inter-company transactions
  • uplift a budget using actual figures as the basis
  • calculate interest on account balances.

What are the Components of an Allocation?

Corporate Allocations uses allocation setups to generate a series of journal transactions.

An allocation setup can contain the following components:

  • an allocation source which identifies the costs or charges to be apportioned.
  • an allocation target which identifies the target account to which the costs or charges are to allocated.
  • an allocation ratio which identifies the proportion of the source that is to be allocated to the target, if required.

An allocation generates balancing journal transactions to keep the ledger in balance. The balancing transaction is posted to an offset account which is identified on either the allocation source, or allocation target, depending on the type of allocation being run.

These three allocation components are identified for each of the following example allocation requirements.

Requirement Allocation Source Allocation Targets Allocation Ratio
To allocate GBP 5000 of the marketing costs to International Sales Division. Marketing Costs

Target: International Marketing costs

Offset: Marketing Costs Recovered

Fixed amount of GBP5000
To allocate 30% of marketing costs to Sales. Marketing Costs

Target: Sales marketing costs

Offset: Marketing Costs Recovered

Fixed Percentage of 30%
To allocate a proportion of office costs to Sales according to the ratio of Sales department floor space to the office total floor space. Head Office Total Costs

Target: Sales head office overheads

Offset: Head Office Costs Recovered

Relative Percentage based on Sales floor space as a percentage of Total floor space.

Notice that the allocation ratio is not restricted to a predefined percentage. The ratio can also be expressed as a fixed amount, or a relative percentage determined by any other statistical or financial values held in the ledger.

Defining the Allocation Components

Define each of the three allocation components separately using the following forms:

  • Corporate Allocation Sources (CAS)
  • Corporate Allocation Targets (CAT)
  • Corporate Allocation Ratios (CAR)

Bring the components together in an allocation setup sequence using Corporate Allocation Setup (CAD).

The components are defined separately so they can be reused in different allocations, without the need to re-enter the details each time. For example, you might need to define several different allocations that apportion the same source amount to different places, or update the same target accounts, or use the same allocation ratios to apportion different types of charges.

Building the Allocation Setup

An allocation setup consists of one or more allocation sequences. Each allocation sequence identifies an allocation source, target and optionally an allocation ratio, all of which determine a particular allocation instruction.

An allocation setup is defined using Corporate Allocation Setup (CAD).

Running an Allocation

An allocation is executed using Corporate Allocation Run (CAL). This executes each allocation sequence. It selects the appropriate transactions from the allocation source, calculates the amount to be allocated, and generates the transactions required to update the target and offset accounts.

Stepped or Sequenced Allocations

Corporate Allocations allows for stepped or sequenced allocations, where calculations are carried out in a number of stages. For example, the costs of a marketing campaign may be divided between companies in the group based on turnover. Each company may then split the cost across sales departments on the basis of the number of units sold. The process of apportioning the campaign costs would take place in two steps. Firstly, the cost is split across group companies. Secondly, the cost is split by unit sales across sales departments. You control this by defining the point at which the allocation is posted.