Why Ledgers Are More Than Data Warehouses of Money
And why integrity, not double-entry, is the foundation of financial software
Data warehouses are poor implementations of ledgers.
You may think that, since all a ledger does sometimes is store money data, you can do away with all the complexity that ledgers require (namely, append-only tables) and use a data warehouse to store all your company’s financial data.
This is a mistake. The purpose of a ledger isn’t simply to store financial data.
A ledger that only stores data is doomed to fail because, in finance, the history is as important as the end state. When auditors and financial analysts look at a company’s finance, they want to make sure that the numbers don’t simply look good, but also tell a good story.
A bad history with a good look has a name: fraud.
The purpose of a ledger isn’t to store money data, but to store its history. We call that integrity: the ability to see what the ledger looked like, and query its accounts’ balances, now and at any point in the past.
Actually, accountants often get this backwards: it is integrity that leads to double-entry, not the other way around.
Ledgers, first, have integrity, and then they enforce double-entry.
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Here’s what you can expect in today’s article:
Why immutability is a tool to verify integrity
Why double entry is its natural consequence
How to achieve consistent historic reads even when you apply compensating entries
Enough intro, let’s dive in.
