In a system setup, the step that is skipped over the quickest is usually the organization definitions. The company name is typed, a warehouse is opened, and the real work begins.
Yet these definitions are the hardest structure to change later. When a second branch is opened six months later or a warehouse separation is needed, all historical data is affected.
In this article, we explained how to design the company, branch, and warehouse hierarchy, scope separation, and setup order.
Table of Contents
Why must it be set up correctly from the start?
Organization definitions are the foundation upon which all documents and stock movements are written. When this foundation changes, the meaning of historical records changes as well.
For example, when a business that started with a single warehouse transitions to warehouse separation later on, it cannot be known which warehouse past movements belonged to. Comparative reports break down at this point.
The same situation applies to branch definitions. A branch added later does not show which branch past sales belonged to.
Therefore, the structure should be designed not for today's needs, but for the foreseeable future. If there is a possibility of a second branch within two years, the structure must be ready for it.
An extra level set up causes no harm when not in use, whereas a missing level set up later generates high costs.
Company level
The company is the highest level of the hierarchy and usually corresponds to a legal entity.
Every structure with a separate tax number must be defined as a separate company. Transactions between them are recorded as actual purchases and sales.
Document series, tax information, and e-document definitions diverge at the company level. Mixing up this distinction creates serious financial problems.
Shared products and current account cards can be used for companies within the same group, which significantly reduces the definition workload.
We covered the consolidated reporting structure in the multi-company consolidation article.
Branch level
A branch represents a physical or operational distinction within the same company and serves as the fundamental breakdown for reporting.
A store, factory, regional office, or sales office can be defined as a branch. Any unit whose performance you want to track separately is a candidate for a branch.
Branch-based income and expense tracking forms the basis of responsibility accounting. Without this distinction, it is impossible to know which unit is generating profit.
It is recommended to define a branch even for single-location businesses, ensuring that a second location to be added in the future can be integrated smoothly.
Branches are also natural cost centers; see the cost center tracking article.
Warehouse level
A warehouse is the lowest level where inventory movements occur, and every inventory record is tied to a warehouse.
Every physically separate area should be defined as a separate warehouse. Main warehouses, retail sales areas, and workshops are typical examples.
Non-physical distinctions can also be set up as warehouses. Return quarantine and damaged product warehouses are such virtual warehouses.
Having more warehouses than necessary increases the transfer workload. Every distinction means an additional movement record.
The correct metric is: any area whose stock you want to view separately should be a separate warehouse.
Warehouse groups
When the number of warehouses increases, gathering them under logical groups simplifies reporting.
Salable warehouses can be defined as one group, and quarantine and damaged warehouses as another. This way, salable stock can be seen at a glance.
Regional grouping is also common; warehouses in the same region are evaluated together.
The group structure is also used in decisions such as which warehouses will be reflected on the marketplace.
You can find the details in the warehouse groups and location structure we discussed in the article.
User scope
The most practical use of the organizational structure is to determine what users will see.
A store employee should only see the data of their own branch. Sales and stock information of other branches is not necessary for them.
A regional manager, on the other hand, is defined to cover multiple branches. The headquarters team sees the entire structure.
This scope separation provides both security and simplicity; unnecessary data serves no purpose other than cluttering the screen.
We explained the scope setup in the branch and warehouse scope article.
Document numbering
Separating document series on a branch basis facilitates both tracking and reconciliation.
Being able to understand which branch a document originated from by looking at the number provides significant convenience in daily operations.
Invoice series, however, are subject to financial legislation and are defined at the company level. This distinction must not be confused.
It is difficult to change series definitions later; therefore, they must be carefully determined during setup.
It is recommended to finalize the application together with your financial advisor.
Reporting impact
The organizational structure directly determines which reports you can obtain.
In a structure without a branch definition, branch comparison cannot be made. This report can only be generated if the data is collected at that breakdown.
In a structure without a warehouse separation, aisle occupancy or workshop stock cannot be monitored.
Therefore, it is useful to list which reports will be needed prior to setup. The structure is designed backward from this list.
Definitions are managed in the business partners module.
Setup order
Setup must proceed from top to bottom; each level is linked to the one above it.
First, company definitions are made and tax information is entered. Then, branches are created and linked to the company.
In the third step, warehouses are defined and linked to the relevant branch. Warehouse types are also determined at this stage.
In the fourth step, warehouse groups are created and the reporting breakdown is prepared.
In the final step, user scopes are defined and tested; it must be verified that each user sees the correct data.
Points to consider
The most common mistake is setting up the structure according to today's scale. When the possibility of growth is ignored, a reinstall is required in a short time.
The second mistake is defining more warehouses than necessary. Every separation creates a transfer burden and slows down operations.
Inconsistent naming also causes confusion later; a clear and orderly naming convention should be adopted.
Failing to test user scopes is also risky; an incorrect scope creates both security and operational problems.
Making structural changes mid-period disrupts comparative reports; the beginning of the period should be preferred.
Frequently asked questions
Should a branch be defined even for a single location?
It is recommended; a second location to be added in the future can be integrated smoothly if the structure is ready.
Can the number of warehouses be increased later?
It can be increased; however, past movements remain according to the old structure and comparison is affected.
How is intercompany transfer recorded?
It is recorded as an actual purchase and sale; warehouse transfer is only used within the same company.
Should it be compatible with the existing ERP structure?
If synchronization is established, mapping is required; See the article on ERP synchronization.
The organizational structure is the foundation that is set up once and left untouched for years, yet affects every report. That is why this is the step that requires the most time.
Build the structure not for today's scale, but for the foreseeable future; while an extra level does no harm, a missing level proves costly later.
List the reports you will need prior to the setup; the structure turns out right when it is designed backwards from this list.
Do not exaggerate the number of warehouses either; every separation means a transfer burden and slows down operations.
Be sure to test user scopes; a misconfigured scope creates both security and operational issues.
By consulting with the EQLEM team, you can configure your organizational structure.