Use of analytical dimensions

I remember that when I first encountered the term analytical dimensions, people tried to explain it to me as some kind of “codified” concept from accounting. It quickly turned out that’s not quite true. In practice, dimensions are simply extra “labels” (tags) we attach to every entry in the general ledger. Instead of asking only “which G/L account?”, we also ask “which department does this relate to?”, “under which project?”, and “in which region?”.

Synonyms: Financial dimensions, analytical tags, accounting attributes. In many companies the word “CC” (cost center) has become a catch-all synonym for a dimension, though it’s only one of many possible dimensions.

Why do we need these dimensions? The real benefits

Alright, but why complicate your life with additional labels? I was skeptical at first too, but in practice the benefits are huge. Instead of creating hundreds of G/L accounts (I’ve seen this—it’s a nightmare), you can keep a much cleaner chart of accounts.

From my experience, the key benefits are:

No more chart-of-accounts “explosion.” You no longer need accounts like 401-Marketing-ProjectX and 401-Marketing-ProjectY. You keep a single account, 401-Marketing costs, and add a dimension PROJECT = X or Y.
You finally see profitability. With one click you can generate an Income Statement (P&L) for a specific department, project, or product line.
Better decisions. You quickly see what makes money and what generates costs. That lets you react before it’s too late (e.g., “Why is Project B in the red when it has high revenue?”).
Sensible budgeting. Instead of budgeting only accounts (e.g., “we’ll spend 200k on external services”), you can budget dimensions (e.g., “IT has 50k for external services”). And most importantly—you can actually control performance against that budget.
Easier cost allocations. Dimensions make it easier to apportion shared costs (e.g., rent) to particular departments or projects.

What analytical dimensions are NOT

I’ve come across many misconceptions about what dimensions are. To avoid mistakes from the start, let’s draw a clear line and explain what they definitely are not:

They are NOT a G/L account. A dimension supplements the account; it does not replace it. A journal entry must always have a G/L account (e.g., 402-External services), and the dimension merely qualifies it (e.g., CC = Marketing).
They are NOT a free-text “Description” field. A dimension is a structured dictionary (e.g., a closed list of departments). It’s not a field where someone types “for marketing,” “to marketing,” or “mrktng.” Thanks to this structure, we can aggregate data.
They are NOT a substitute for an invoice number. They aren’t meant to store reference data or notes for the accountant. There are other fields in the ERP system for that.

Examples and mini-case

Sounds good in theory—what about practice? In projects I’ve run, we most often see a few key dimensions:

CC (Cost Center): The absolute foundation. Usually these are company departments (e.g., IT, Sales, Marketing, Management).
Project: Essential in services, construction, and IT. Lets you track the profitability of each engagement.
Region / Market: Necessary when you sell across different locations (e.g., North, South, Export-DE).
Product Line / Service Group: Lets you check which product or service group is most profitable.

Imagine an IT company. Its standard P&L shows a profit of 100k. Management is happy, but they don’t know which project is actually profitable and which one is being “covered” by others.

Solution: We implement two dimensions: PROJECT and CC.

When a sales invoice arrives for project “Implementation A,” we post it to 701-Revenue with PROJECT = A.
When we pay a developer’s salary and they worked 100% on that project, we post it to 405-Salaries with PROJECT = A and CC = Developers.
When we pay for advertising (an overhead cost), we post it to 402-External services with CC = Marketing only.

Effect: After a month, management can filter the P&L for PROJECT = A. They can see the revenue and direct costs (like the developer’s salary) assigned to that project. The project margin is immediately visible. They can also view costs for the entire department CC = Marketing.

Levels and types of dimensions

Digging deeper into ERP systems (and as you know, I’m closest to Business Central), you’ll often encounter a technical split of dimensions. This matters for system configuration. The two types most often mentioned are:

Global (Primary) Dimensions: Typically the two most important dimensions for the company (e.g., CC and Project). The system “stitches” them directly into the main tables (ledgers, entries), which makes reporting on them blazing fast.
Additional (Shortcut) Dimensions: All the other tags you might need (e.g., Region, Employee, Marketing Campaign). The system stores them a bit differently, but they’re just as functional for analysis.

Values and hierarchies

OK, so we have a dimension called “CC.” But the dimension alone is nothing—you need its values (the specific selectable “tags”). That’s the dictionary I mentioned.

More importantly, these values shouldn’t be a flat list. Real analytical power appears when you build hierarchies.

Example for the CC dimension:

Value codes:
- 100 – Management
- 210 – Domestic Sales
- 220 – Export Sales
- 300 – Administration
- 400 – Production
Hierarchy (how we want to see it in a report):
- COMPANY_TOTAL (sum of 100–400)
  - OVERHEADS (sum of 100 + 300)
    - 100 – Management
    - 300 – Administration
  - SALES (sum of 210 + 220)
    - 210 – Domestic Sales
    - 220 – Export Sales
  - PRODUCTION (code 400)

Thanks to this, a manager can see the costs of Domestic Sales alone, all of SALES (as a sum), or OVERHEADS.

Rules, validations, and defaulting

It’s worth noting that dimensions are great, but without discipline they quickly turn into a mess. To keep data clean, ERP systems give us three powerful mechanisms.

Defaulting: The idea is to minimize manual entry. The system should be set so that, for example, when you choose the employee “Jan Kowalski,” it automatically suggests CC = IT. Defaults are set on customer/vendor cards, fixed assets, or even G/L accounts.
Validations: These are our “safety rules.” We can tell the system: “For every account in class ‘4’ (costs), the CC dimension must be filled in. Period.” The system simply won’t let you post a transaction without it.
Blocked combinations: We can also block nonsensical pairings, e.g., “PROJECT = ImplementationA must never be combined with CC = Marketing” (because we know Marketing doesn’t work on that project).

Data flow (Source → Ledger → BI)

I’m often asked: “Where exactly does the dimension show up?” It’s important to understand that an analytical dimension “travels” with the transaction from beginning to end.

SOURCE: It all starts in operational modules. A salesperson creates a sales order and already selects the client’s Region. An employee files a travel expense and enters CC and Project.

LEDGER (G/L): When the document (invoice, expense report, payroll) is posted, the ERP system “stamps” every General Ledger entry not only with the G/L account but also with the full set of dimensions carried over from the source document.

BI (Business Intelligence): At the end of this path are analytical tools (like Power BI) or reports in the ERP itself. They query the General Ledger and let us “slice” the data by those dimensions recorded in step two.

Reporting (the 3 most important views)

Why all this effort? For the reports, of course. This is the “wow” moment for management when they see data in a new light. Instead of a single “Total” column, they suddenly see detail.

Here are the 3 reports that, in my opinion, deliver the most value:

P&L by Dimension (e.g., by CC): An absolute must-have. Instead of a classic P&L, you see the same structure (revenue, costs), but with departments (Marketing, Sales, IT…) as columns. You immediately know who spent how much and (if applicable) how much revenue they generated.
Budget vs. Actuals (for a Dimension): The key to cost control. The Marketing Manager logs in and sees their budget (e.g., 100k for the quarter) and the actuals (e.g., 80k) in real time. They also see that “Events” have already consumed 110% of budget.
Trial Balance with Dimensions: More of an analytical than a managerial tool. Lets you drill down to the lowest level and view every Account + CC + Project… combination and its balance. Irreplaceable for error-hunting or very deep analysis.

Best practices

Based on my knowledge, here’s a short checklist. If you’re thinking about implementing dimensions, I recommend sticking to it:

Start from the reports. Before you configure anything, sketch your target P&L per department on paper. Reports dictate which dimensions you need.
Less is more. Don’t create 10 dimensions “just in case.” In my experience, 3–5 key dimensions are plenty. Too many dimensions are a nightmare for accounting and a source of errors.
Define an “owner.” Who in the company is allowed to add a new CC? Who can open a new Project? This process must be controlled (e.g., by Controlling), otherwise your dictionary will quickly become a mess.
Decide what’s mandatory. Choose which dimensions are absolutely critical (e.g., CC on every cost) and set that as a validation rule in the system.
Use hierarchies. Don’t create a flat list of 50 departments. Group them (e.g., Sales Teams, Support Teams) so you can report at a sensible summary level.
Automate (defaulting). Set a default CC for every employee, a default Region for each customer. The less manual typing, the fewer errors and the faster the work.
Train people (not just accounting!). Sales must understand why they select a Region on an order. A project manager must know why they enter a project code on an expense report. If they don’t see the point, the data will be worthless.

Glossary

To wrap up, here’s a glossary that brings finance and accounting terms a bit closer. Learning these expressions helped me a lot when building up my knowledge.

Analytical dimensions (Financial dimensions)

Additional “labels” (tags) attached to every accounting entry. Their goal is to describe the business context of a transaction (e.g., which department incurred the cost, which project the revenue related to). They supplement the G/L account but do not replace it.

Profit and Loss Statement (Income Statement / P&L)

One of the most important financial reports. Shows whether the company posted a profit (revenue > costs) or a loss (costs > revenue) in a given period. Thanks to dimensions, you can prepare a P&L for a single department or project.

CC (Cost Center)

The most popular example of an analytical dimension. Used to mark transactions as costs of a specific department or organizational unit (e.g., IT, Marketing, Management) to track who generates costs in the company.

Chart of accounts

A formal, structured list of all G/L accounts (e.g., 401-Material costs, 701-Sales revenue) on which the company records its operations. Dimensions help keep the chart “clean” and simple, without having to create hundreds of new accounts.

G/L account

A basic unit of record (e.g., 405-Salaries) to which every transaction is posted. An analytical dimension is merely additional information to the account—not the account itself.

General Ledger (G/L)

The central register of all posted operations in the company. This is where entries (postings) end up along with their assigned analytical dimensions, becoming the data source for reports.

Dimension values

The specific selectable “tags” within a given dimension. If the dimension is PROJECT, its values might be P-001, P-002, Internal Project. They form a closed dictionary.

Dimension hierarchy

A logical (tree) structure grouping the dimension’s values. It enables reporting at different levels of detail (e.g., see costs for Domestic Sales or for the entire SALES_TOTAL group).

Global Dimensions

In some ERP systems (e.g., Business Central) the 2–3 most important dimensions (e.g., CC, Project) that are technically “stitched” to the main system tables to ensure the fastest reporting.

Defaulting (of dimensions)

An ERP mechanism that automatically suggests a dimension value to speed up work and reduce error risk (e.g., the system auto-suggests CC=Sales when a specific salesperson is selected).

Dimension validations

Configured “safety” rules in the system. They can require a dimension to be provided (e.g., “every cost must have an CC”) or block illogical combinations (e.g., “this project cannot be combined with that department”).