Without the right accounting software, your not-for-profit chart of accounts (COA) can become unwieldy. Many not-for-profits find it difficult to sift through ever-multiplying COAs with thousands of unique account numbers to create reports or fix errors during close.
Most traditional financial management solutions force you to set up a separate expense account for each segment. For example, to track 15 projects, from six locations, with five departments each, you would need 450 account code combinations. What would happen if you needed to filter transactions by multiple factors? Having a bloated COA makes it time-consuming and difficult to quickly get the information your not-for-profit needs.
Thankfully, there is a better way to organize financial information to make not-for-profit accounting faster and more efficient: Dimensions. Modern cloud financial management solutions, like Sage Intacct, help not-for-profits keep their COA tamed and simple using table-driven architecture to structure data around logic-based dimensions. Read on to find out how a dimensional chart of accounts provides better visibility an reduces complexity, simplifying your COA.
Traditional accounting systems for not-for-profits have complicated and wieldy chart of accounts and are unable to track all the granular data organizations need. Sage Intacct’s multidimensional chart of accounts provides a flexible foundation to maintain greater stewardship, gain deeper financial visibility with greater context, and make more informed decisions with real time analytics.
In Sage Intacct, you can define the key attributes you want to use in accounting and reporting, such as grant, project, class, department, program, location, and more. You can also rename or repurpose a standard dimension to fit your needs – for example, you can rename class to fund to track revenue and expenses against different funds.
Not-for-profit organizations can keep their COA simple by eliminating the need to create so many account numbers with multidimensional accounting. You can do this by simply “tag” transactions with dimensions to add financial and operational context to your data. Tags make it easy to sort and search for data for reporting with meaningful context.
Not-for-profits are forced to export data into Excel spreadsheets at the end of each period with traditional accounting systems. After they data is exported, they can begin the long process of filtering data to get to the meaning behind the transactions.
Having a dimensional chart of accounts means not-for-profits can access metrics in just minutes and perform a more meaningful analysis of performance. You can track results of fundraising efforts or project expenses with ease. You can also see which fundraising efforts or programs have the most traction.
It is important for your organization to understand where your donations are coming from, which programs are making the biggest impact, and what is costing you the most money. Let’s say your not-for-profit is starting a new marketing campaign and donor initiative. Your board has requested a weekly review of the financial impact of this new campaign. Using Sage Intacct, your team can provide this weekly update of up-to-the-minute financials to provide a complete picture of performance. You can even filter the results of your campaign by location to show development where to get the biggest return on investment.
There is another advantage to taming your not-for-profit COA with dimensions. A lean COA can help you close your books faster and leaves you with fewer errors to correct. A dimensional not-for-profit chart of accounts emboldens your financial team to close in record time and deliver key financial reports to the executive team quickly.
How do dimensions make such a profound and positive impact? Dimensions help you set up your chart of accounts easily. Instead of setting up separate expense accounts for each department, you can set up a single expense account, then use the department dimension to filter by individual departments in reports.
Dimensions enable real-time reporting that creates not-for-profit financial transparency by pulling information from various aspects of your organization. You can look at revenue for a specific donor or fundraising activity. Dimensions allow you to analyze not-for-profit performance in ways that are not possible with a traditional chart of accounts. You can break down your data for more focused analysis with the ability to independently tag transactions. By tagging multiple dimensions as you enter transactions, you capture more granular financial and operational data tailored to your not-for-profit. For example, if your not-for-profit revolves around programs, you can tag specific programs in your transactions to analyze performance between them.
There are many advantages to a dimensional not-for-profit chart of accounts, including deeper visibility with greater context, reduced complexity, up-to-the-minute report creation, and more informed decision making. Not-for-profit organizations should leverage the power of multidimensional accounting with a modern cloud financial management system to gain the insights needed to show donors how your organization is making an impact.
The increasing demand for transparency and accountability from donors is compelling today’s not-for-profits to seek ways to both produce and demonstrate successful outcomes. Many not-for-profits struggle with heightened expectations and growing scrutiny from several sources — including increasingly savvy funders looking for financial management techniques and controls employed commonly by for-profit businesses. This whitepaper describes how not-for-profits like yours can effectively leverage outcome metrics to boost success and attract donors. Read it now.