How a Modern Accounting System Simplifies Your Chart of Accounts
How a Modern Accounting System Simplifies Your Chart of Accounts.
The chart of accounts is the foundation of your accounting system. In legacy systems such as Sage 100, Microsoft Dynamics, and QuickBooks to gain visibility across departments, locations and other reporting segments require an account number for each variable. This often leads to a chart of accounts that is 100s if not 1000s of individual account numbers.
Sage Intacct is a modern financial management solution that uses dimensions, greatly reducing the number of accounts. Each reporting segment is an individual table allowing for multiple reporting options and data classification.
Let’s look at some examples.
Healthcare organizations often need to report on locations, departments, types of service even physicians. In a legacy system, each possible variation would be a separate account.
Over time, this list of accounts becomes cumbersome and difficult to manage. The larger the list the increased risks for posting errors. For staff who enter transactions, it’s like navigating a labyrinth of possibilities.
In a modern accounting solution such as Sage Intacct, you would have one revenue account of 4000. Then select the segments from their respective table (location, department, service, and physician). Each of these segments can then be reported on separately or in combination.
In a dimensional accounting world, finance professionals categorize or tag a single transaction by choosing the attributes that apply. A few drop-down menus, a few clicks, and you are done assigning the segments to any transaction for greater depth of reporting.
Dimensional accounting is used across the system – general ledger, receivables, payables, revenue management, timekeeping, and more.
Non-profit organizations have a whole other set of items to track such as funds, grants, program-projects. A typical account might look like 4400-2201-300-50.
If a non-profit has 5 funds, 4 grants, 3 programs and 1 project they will need to set up 60 GL accounts for every natural account. For staff to memorize every variable or scroll through a list of accounts is incredibly inefficient.
Data entry is simplified as staff enter transactions. In this case, they select the fund by typing either a portion of the description or the beginning account number. The system automatically drops down the list for selection. Then tab to the grants field and begin entering the grant name or number. Moving to the next field for the next entry.
With dimensional accounting, you take the guesswork out of data entry and simplify the process.
Four benefits that are a game-changer when moving from a traditional (hard-coded) chart of accounts to a modern dimensional system are:
Benefit #1: Reduce complexity
As we’ve demonstrated above, rather than needing 60 full account numbers in a legacy system, you would only need one account for each revenue or fund. Maintaining a list of a dozen locations, 10 departments, 4 service types and 50 physicians is much easier than maintaining a chart of accounts list of a thousand hard-coded accounts.
Benefit #2: Simplified reporting
A dimensional chart of accounts simplifies reporting while increasing what can be reported. Rather than exporting hard-coded, lengthy accounts to Excel then spending hours creating formulas to produce the reports you need for critical decision-making. Dimensional accounting provides flexibility to choose not only what you want to report on but how.
If you want a profit and loss by location, no problem. Simply choose the dimension location and all or select groups of locations. Expenses by department is streamlined and revenue by fund is done by a simple selection of the fund or all funds.
Benefit #3: Easy analysis
Reduce dependency on Excel spreadsheets provides for reporting within Sage Intacct and allows for direct drill-down capabilities. If a number doesn’t quite look right, drill down to the transactional data for quick analysis. Know with confidence what made up the number without running secondary reports or hopping between Excel and your accounting system.
Take quick action on anything that may need to be reclassified to a different account or period. Ensuring the reports produced are accurate and meaningful.
Benefit #4: Visibility across all operations
Every user within Sage Intacct can have their dashboard, providing insight into metrics meaningful to them. Your Accounts Payable Manager can have the aging report, cash flow, and bank balance information at-a-glance.
Your Controller can see expenses by department, revenue by source, and trend analysis graphs and charts to take immediate action if needed. With role-based dashboards, everyone from your CFO to department managers can quickly and easily access the information they need. Freeing up your accounting department to do what they do best.
With a modern financial management system, dimensional accounting ensures the integrity of the data and provides for quick reporting. Take the guesswork out of picking the correct account and set aside those spreadsheets, instead, you’ll have a powerful system that provides in-depth data that equips you to make decisions quickly and with certainty.
To learn how dimensional accounting can benefit your organization, please feel free to contact us.