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General ledger – A mini guide for manufacturers
Blog //11-10-2021

General ledger – A mini guide for manufacturers

by Andrew Pearson, SME Product Manager

What is a general ledger?

A general ledger provides the fundamental building blocks for a company’s finances. It will typically include every transaction made by your business, in chronological order, and act as the master copy of all your income and expenditure.

A general ledger records a manufacturer’s following aspects:

  • Assets
  • Liabilities
  • Expenses
  • Revenue
  • Equity

As your business grows, you may eventually have multiple accounts. A general ledger includes all these accounts.

Why is a general ledger important?

Simply put, a general ledger helps to ensure your financial data is accurate and reliable. It is one of the most important reports for your manufacturing business, and supports your financial operations, market resilience, and overall success. 

As it includes every transaction, you can use this detailed data to prepare financial statements, and to generate reports for tax-related purposes too.

What are the benefits of using a general ledger?

By having an up-to-date general ledger, you gain access to practical everyday benefits. For example, it becomes easier to:

  • Spot fraud
  • Determine the cause of rising costs
  • Apply for finance
  • Provide other stakeholders with clear financial summaries
  • Highlight any unusual transactions or expenditure

A general ledger is helpful, not only because it assists with generating financial statements, but it’s needed to file taxes too. By having a place to view all incomings and outgoings, it becomes much easier, for example, to find proof of payment to a supplier (rather than sifting through lots of individual records).

General ledgers provide transparency, clarity, and confidence, which are all crucial factors when trying to measure the standing of your business. Having a grasp of your financial health is important when it comes to pivotal decisions, especially around investment, expansion, planning, and mergers.

Auditing accounts before any of these activities is key too, and a robust general ledger is needed to ensure these tasks are completed in the smoothest fashion possible.

What are the different types of ledger?

Ledgers can be broken up into the three following types:

  • Sales ledger
  • Purchase ledger
  • General ledger

As the name suggests, a sales ledger represents accounts receivable, whilst a purchase ledger consists of accounts payable. However, both types are also represented in the general ledger, which arguably makes it the most important one.

To create a general ledger, the following steps need to be taken:

  • Either make use of a spreadsheet or, preferably, accounting software
  • Create your accounts receivable record
  • Create your purchase ledger record
  • Combine both records to formulate the general ledger

To gain even greater value from the general ledger, input as much additional data as you can (as this will allow you to run complex reports with much less manual effort). Software can support this process, and the more sophisticated solutions will automate much of the data entry (which is a great way to save your business time and money).

How to maintain a ledger book for manufacturers?

Ultimately, you maintain a general ledger in manufacturing in the same way you would for any other business. But with the modern need for improved efficiency (and the adoption of cloud systems for many other aspects of the production process), manufacturers are looking for centralised solutions that integrate multiple functions and support existing infrastructure.

In such a scenario, the upkeep of your general ledger will be completed by going about your day-to-day activities, and by completing admin in other areas.

Keeping a ledger book within a wider cloud solution can be a seamless experience, as financial records, production processes, inventory, contact management, supply chain and even waste management will impact one another.

By recording all financial activity within a digital system (that has the appropriate functionality), you are ultimately creating a central record that becomes the general ledger.

How can Advanced help with general ledger?

Our Manufacturing software solutions go one step further when it comes to the benefits gained with a general ledger. With features such unified ledger accounting functionality, this means that all the different types of ledgers you use (including the general ledger) can be brought together in a single book of accounts.

Accounts are structured in a hierarchical fashion, making it easier to find and understand the relevant data. It increases the flexibility of your accounting and saves you time too (as there’s no need to reconcile individual ledgers). Financial reporting is also made simpler and faster, as you have access to user-defined dashboards.

If you’re looking to gain the benefits that come from using a unified ledger (and want to enhance your overall accounting process), then take a look at our Manufacturing software solutions.

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Andrew Pearson

Andrew Pearson


SME Product Manager

Joined with our Acquisition of Exchequer Accounting Software back in 2016, Andrew is product manager for our SME solutions ensuring that our roadmaps are representative of market requirements. Andrew has over 15 years of experience working with finance and ERP software from a technical, development and support capacity.

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