1. Understanding Enterprise Structures
  2. Model Your Business Units in Your Enterprise Structure

Model Your Business Units in Your Enterprise Structure

This example uses a fictitious global company to demonstrate the business unit analysis that can occur during the enterprise structure configuration planning process.

Scenario

Your company, InFusion Corporation, is a multinational conglomerate that operates in the United States (US) and the United Kingdom (UK). InFusion has purchased an Oracle Fusion Enterprise Resource Planning (ERP) solution including Oracle Fusion General Ledger and all of the Oracle Fusion subledgers. You are chairing a committee to discuss creation of a model for your global enterprise structure including both your US and UK operations.

InFusion Corporation

InFusion Corporation has 400 plus employees and revenue of 120 million US dollars. Your product line includes all the components to build and maintain air quality monitoring systems for homes and businesses. You have two distribution centers and three warehouses that share a common item master in the US and UK. Your financial services organization provides funding to your customers for the start-up costs of these systems.

The following are elements you must consider in creating your business units for your global enterprise structure.

  • At which level do you track profit and loss (revenue and expenses) and strategic objectives?

  • Do you require balance sheet for your management entities? Is capital utilization reported on the level of business units?

  • Do you use business units and balancing segments to represent your businesses and divisions?

  • Do you secure data by a segment representing each department or legal entity or both to produce useful, but confidential management reports?

  • Is your procurement centralized, or do individual business units perform the procurement function?

  • Can your business units process transactions on behalf of many legal entities?

  • How do you want to represent your business units and divisions in the chart of accounts?

  • How will your business units be represented in ledgers?

Global Enterprise Structure Model with Business Unit

The following figure summarizes the model that your committee has designed and uses numbers to provide a sample representation of your structure. The model includes the recommendation to create four separate business units (BU):

  • InFusion America Inc. has BU 1: US Systems and BU 4: Corporate Processing Shared Service Center

  • InFusion Financial Services Inc. has BU 2: Financial Services

  • InFusion UK Services Ltd. has BU 3: UK Systems

InFusion Corporation is the enterprise and has two divisions, InFusion United States (US) and InFusion United Kingdom (UK). InFusion US has two legal entities, InFusion America, Inc. and InFusion Financial Services, Inc. each with its own ledger. InFusion UK has one legal entity, InFusion UK Systems, Ltd. which has on primary ledger in Great Britain pounds (GBP) and a Reporting Currency representation in United States dollars (USD). Each legal entity has its own business unit (BU). InFusion America also has a BU that processes general and administrative transactions across all legal entities.

Business Units 1, 2, and 3 record the transactions of their respective legal entities. Business Unit 4 processes the corporate level transactions, including payable, procurement and human resource functions for the entire enterprise. The implementation of BU 4 reduces administrative costs, provides consistent enforcement of company policies, and improves efficiency across the organization.