Setup of dimensions (cost centers) in Dynamics NAV

Financial management of a company requires, beyond information provided by financial accounting, information specific to the business of the company. For this purpose companies implement what is called cost accounting – tracing costs (and revenues) associated to products, processes, projects etc.

In Dynamics NAV (Navision) cost accounting is  performed through dimensions. Dimensions contain information defined by the user which is relevant for analyzing company’s activities and which can be associated to every type of transaction entered into the system.

In order to setup dimensions first we define the categories of information we need to trace. For example, we can define types of dimensions such as company’ s departments, geographical zones, sales persons etc.

Then, for each type of dimension we define specific values. In the picture bellow, you can see several possibile values for dimension type “DEPARTMENTS”.

When we are defining dimensions’ values  we have the possibility to create dimensions which summarizes values from other dimensions, and thus we can have an hierarchical structure of reporting.

During an implementation it is recommended that starting from analysis phase, when business requirements are established, to be determined also the dimensions, so that when transactions are recorded dimensions are already available to be allocated. Of course, you can add dimensions later, but in this case you can’t analyze  through dimensions  the entire historical data.

After we define the dimensions the next step is to define a dimension policy to be applied to various entities which can be defined in Dynamics NAV, in order to to facilitate entering dimensions on transactions and also to define business rules – what is allowed or not into the system.

We can associate dimensions and rules for working with dimensions to general ledger accounts, items, customers, vendors, bank account, resources, fixed assets etc. It is recommended that dimensions to be associated to general ledger accounts, whenever is possible.

In the picture above you can see how on G/L Account “628 Other third party services” we have associated two dimensions: “DEPARTMENT” and “ZONE”. For “DEPARTMENT” we have assigned a default value , “ADMIN”  – Administrative Department. This implies that on any transaction involving the general ledger account 628 the system will bring the dimension value “ADMIN”, but the user  can change this value if he wishes to.

For the dimension “ZONE” there is no default value, but it is specified as “Code mandatory”. This setup forces the user to select for any transaction involving G/L Account 628 one of the values available for dimensions “ZONE”.

Besides association of dimensions to entities, we can also create rules regarding dimensions’ combinations, to avoid operating errors .

Rules are enforced in a  matrix widows, where are defined the relations between one type of dimension or certain values of that dimensions type and another type of dimensions or values of that type of dimension.

Let say, for example, that we know some sort of expenses can be allocated either to sales department, either to a sales campaign, but never to both of them. In this case, in the windows of dimensions combinations we will block the combination between the value “SALES” of dimension “DEPARTMENT” and any value of dimension “SALES CAMP”.

Most probably  the setup of dimensions combinations will be performed after some transactions will be entered into the system and some analysis of dimensions will be made. In a future article, we will describe how are dimensions associated to transactions and the reporting instruments available fo analysis by dimensions.

For additional information about dimensions, you can see these YouTube videos: Dynamics NAV – How to Set Up Dimensions

Do you want to explore other functionalities in Dynamics NAV?  Check here: Dynamics NAV (Navision) Resources