Analytical Accounting is Hidden Gem for NonProfits

Have you ever wanted to track all of the expenses related to an event that you are hosting?   Or, maybe you would like to know how much it is truly costing you to remodel that office space.     Or, maybe you want to track grant activity across fiscal years.    You might even want to track the individual out-of-pocket expenses for your executives and board members.   If you are like most non-profit organizations, obtaining that type of information is difficult, if not impossible without ending up with a convoluted chart of accounts.   Fortunately, there is a better way.

Microsoft Dynamics GP comes standard with Analytical Accounting, a powerful, yet little known feature that not only makes is possible to track financial information outside of the chart of accounts, it makes it a breeze.    I like to think of analytical accounting as triple-entry accounting.   Not only can you post your debits and credits, you can also post your financial transactions to user-defined financial dimensions that are stored and tracked separately from your chart of accounts.    Consider, for example, the following scenario:

ABC Food Rescue has decided to host a community wide picnic to raise funds to help support their mission.   In order to measure the success of the fundraiser and determine whether they should make it an annual  event, they want to track all of the associated expenses and revenues.     Their controller, Sue, does not want to create new General Ledger account numbers to track the event, however, because it may only be a one-time event and she doesn’t want to clutter up the general ledger with accounts that are only going to be used once.

Fortunately, ABC Food Rescue is using Microsoft Dynamics GP and has Analytical Accounting.   With Analytical Accounting, Sue has the ability to set up a dimension called EVENTS and a Dimension Code within EVENTS that she will call 2011 PICNIC.    In addition, she can configure Dynamics GP so that every time an entry is made to accounts payable, payroll or cash receipts, the user has the option of distributing part or all of that transaction to the 2011 PICNIC dimension.

To see how this works, let’s assume that an invoice comes in from AAA Tent & Awning for the $4,500 for a tent for the event.   When the invoice is entered, the Fund Raising expense account will be debited for $4,500 and Accounts Payable will be credited for $4,500.  In addition, an Analytical Accounting window will pop-up and the $4,500 can be allocated to the EVENT called 2011 PICNIC as shown below:

                G/L Account                                                       Debit                     Credit
                5050 – Fund Raising Expenses                   $4,500
2000 – Accounts Payable                                                              $4,500

                Dimension Code                                              Analytical Accounting Distribution
                2011 PICNIC                                                                        $4,500

Similarly, revenues can be allocated to the 2011 PICNIC.  For example, let’s assume that a key sponsor donates $5,000 to the event.    When the cash receipt is entered, Cash will be debited for $5,00 and the Sponsorships account will be credited for $5,000.   In addition an Analytical Accounting windows will pop us and the $5,000 can be allocated to the EVENT called 2011 PICNIC as shown below:

                G/L Account                                                       Debit                     Credit
                1000 – Cash                                                       $5,000
4100 – Sponsorships                                                                       $5,000

                Dimension Code                                              Analytical Accounting Distribution
                2011 PICNIC                                                                        $5,000

Although the entire transaction amount was allocated to one dimension in the preceding examples, this does not have to be the case.    Depending on how the Analytical Accounting is configured, any portion of the transaction amount can be allocated to any number of dimensions.

At any time, reports can be run showing the activity within a given dimension and /or the overall profitability or cost.    For example, if a P&L report is run against the 2011 PICNIC Dimension at this time, it will show:

Revenues                            $5,000
Expenses                             $4,500
Net Proceeds                    $   500

As you can see, Analytical Accounting offers a simple, but highly effective method for NonProfits to track financial information independent of the chart of accounts.

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ERP professionals providing insight and advice for not for profit organizations.