ShelbyNext Financials: General Ledger Chart of Accounts Design (or Redesign)

Transcription

1 ShelbyNext Financials: General Ledger Chart of Accounts Design (or Redesign) (Course #F222) Presented by: Dave Heston, Shelby Independent Consultant Trainer 2018 Shelby Systems, Inc. Other brand and product names are trademarks or registered trademarks of the respective holders.

2 Objective To understand the tools available to design (or redesign) a chart of accounts. The following topics are presented in this session: Questions to ask when designing or redesigning a Chart of Accounts Some of the tools available for crafting an appropriate Account Structure and Chart of Accounts Scenarios and examples to consider Discussion when to start with a new Account Structure and Chart of Accounts Special thanks to Vonna Laue and Michael Martin and the Evangelical Council for Financial Accountability (ECFA) for the following resource: 10 ESSENTIALS OF CHURCH ACCOUNTING AND FINANCIAL REPORTING webinar 2

3 Questions to Consider When Designing a Chart of Accounts The Chart of Accounts is the foundation of your financial system. All reports are derived from the structure, order, and groupings that you build in your Account Structure. It defines your Statement of Financial Position and Statement of Activities reports. Spending the appropriate amount of time and research in design can save your team time and confusion as you work each week in this structure. Chart of Accounts vary between ministries. What are the Big Questions What are the organizational priorities and purposes of your ministry? o Does your Accounting Structure reflect this purpose by creating the correct accounts, account groups, and levels within your ministry? o Are you a single campus ministry or does your ministry have multiple campuses or locations? o Does your ministry have a large congregation and staff or is the ministry led by a staff of under 10 people with a membership of less than 300 members? o Do you have other entities that are a part of your ministry? Do they all operate under the same 501c3 tax id? o Are you in a building or capital improvements campaign? (Who isn t?) What ministry structures that are important? o How do you divide operational income/expenses from designated income/expenses? o Does your general income from members support all ministries or do individual ministries within the church collect a significant portion of their income? o Do you track Fixed Assets? o Will you need multiple Funds, Cost Centers, Departments, or other divisions? o Are there requirements or stipulations from your ministry s regional or denominational headquarters that pertain to Account Structure? Who needs to be consulted when designing or redesigning your Chart of Accounts? o Pastors o Board Members o Ministry Heads o Perhaps even key volunteers or committees o Auditors 3

4 What is a good Chart of Account design? Chart of Accounts - - ECFA Determine the financial information that needs to be communicated - basis Start simple easy to add to as needed Review periodically new departments added to your ministry, new assets, etc. Financial Reporting This must be tailored for each audience - - ECFA Ministry leaders true transactions, budget to actual, etc. Leadership team income/expense statement as a whole, balance sheet, cash available, budget, etc. Finance committee more detail, balance sheet, income/expense statement, cash available, cash projections, etc. Governing board balance sheet, income/expense summary, cash available, etc. Congregation annual report What are the requirements established to meet Generally Accepted Accounting Principles (GAAP)? Financial reporting is the language that communicates information about the financial condition and operational results of a company (public or private), not-for-profit organization, or state or local government. The accounting standards developed and established by the Financial Accounting Standards Board (FASB) determines how financial statements are prepared. The standards are known collectively as Generally Accepted Accounting Principles or GAAP. The Chart of Accounts will control the output of all reports, so it is crucial to follow standards in design, so that reports more easily follow GAAP requirements and guidelines. 4

5 Typical GAAP standards would suggest the following numbering: Assets beginning with 1 (such as ) Liabilities beginning with 2 (such as ) Capital/Net Assets beginning with 3 (such as ) Income (or Revenue) beginning with 4 (such as ) Expenses beginning with 5, 6, 7, 8, or 9 (such as ) So, your account numbering might be something like this Assets Liabilties Capital (Net Assets) Income Expenses Current Assets ( ) Fixed Assets ( ) Other Assets ( ) Current Liabilities ( ) Long Term Liabilities ( ) Net Assets without Donor Restrictions ( ) Net Assets with Donor Restrictions ( ) General Contributions ( ) Non-contribution Income ( ) Donor Designated Contributions ( ) Personnel Expenses ( ) Program Expenses ( ) Operational Expenses ( ) Designated Expenses ( ) Reserves/Non-cash ( ) 5

6 Will you need Funds, Cost Centers, Departments, or other levels? In other words, will you need to have divisions or levels to isolate and total the activity? There is not a standard answer here, this really depends on the needs and mission of your ministry. Using Funds A fund is a company within a company. If you need a separate Balance Sheet or you need a clean way to use the same physical bank account for two or more functions where keeping a separate bottom line is essential, then you may need multiple funds. Each fund has its own chart of accounts (watch the account numbers between funds), bank accounts and financial reports. Typical funds might include Operations (Church), Designated, Preschool, Board/Elder Designated or some other entity that is wholly owned by the church where you want to track the activity uniquely. If you are a multisite church or multicampus then you may find you prefer having one or more funds unique for each campus. Each fund has one balance sheet, so if you need multiple balance sheets, then you will need multiple funds. Funds should not be used if you need everything reported on one balance sheet and if you really need simplicity of structure. Using Cost Centers A cost center is the level above departments. Using cost centers requires only one Balance Sheet. Cost centers can represent levels of ministry, Church, School, Designated Funds, Building Fund, or Personnel, Administation, Ministry, Missions, Coffee House, etc. Cost centers can also be used for multicampus ministries, with each cost center representing a campus. Cost centers can reuse departments and account numbers. Using Departments Departments help to segment ministry areas. Departments might coincide somewhat with actual departments of responsibility within the church, but the reasons for using multiple departments in your account structure have more to do with user access, homogeneous structure, and totals. Each department (level) can reuse account numbers. This means you can have several ministry departments that use the same ten or twelve budget level account numbers mixed in with additional accounts unique to each ministry. You have more flexibility when using departments. 6

7 Can you utilize a Standardized Chart of Account structure? If you find that you have several income or expense lines of similar purpose that you want to use in each department, then create a standardized chart of accounts with the same numbering structure for each of your departments. Here is a mockup of what this might look like. It is likely that you will have accounts in each department unique to that department, but many of the account numbers could be repeated for several departments for those items that are similar in purpose. Standardized design Children's Ministry Youth Ministry Adult Groups Worship Ministry Missions Sports Leagues Operations Bookstore Income Offerings Activities Expenses Personnel Operations Activities Offerings-General Activities/Events X X X X X Camps/Retreats X X X Awana X Youth Trips X Leagues X Mens Minsitry X Bookstore/Coffee Sales X Administration X X X X X X X Directors X X X X X X X Nursery X Payroll Taxes X X X X X X X Curriculum/study books X X X Ministry contacts/gifts X X X X X X X Nursery supplies X Postage/shipping X X X X X X X X Printing/copier X X X X X X X X Snacks X X X X Supplies X X X X X X X X Activities/Events X X X X X Camps/Retreats X X X X Awana X Youth Trips X Leagues X 7

8 Tools for Creating an Account Structure If you are creating your account structure from the ground up, here are some time saving tips that could make that process simpler and quicker. Creating Funds, Departments, and Other Levels To set up or modify the Account Structure, hover over Modify on the top navigation bar, then click Account Structure in the dropdown menu. This is where you decide on the levels (such as Funds and Departments) that you will use to control your Account Structure and facilitate account rights, data entry, and reporting. Click on the Settings link to control which levels will be offered in this Account Structure. There are up to three levels to control Balance Sheet and then there are up to three levels within a Fund to control the Budgeted level accounts. Remember, there is only one Balance Sheet per Fund and the Balance Sheet accounts are required to be in department zero. Each level can be Renamed. Each level is unique to the fiscal year. This is also where you control Account Length and whether you will Use Sub- Accounts. 8

9 Click the button to create a new Fund. This will bring up a pop up window for you to choose the Fund Number and Fund Name. You can also choose to copy this fund from another existing fund. This allows the user to build the common layout of a fund then use that same layout for additional funds to create a standardized Account Structure. More on that in a later section. 9

10 To add a new Department, the user must click on the green plus to the left of the Fund to add a Department within that Fund. It is best to Expand All to see all the levels within each Fund before you add or edit a Department. Remember, Asset, Liability and Capital accounts can only exist in department 0 which is the Balance Sheet default. When adding a new department you can copy the accounts from another Department. This could save you a good bit of time when setting up several departments in a standardized account structure. More on that in a later section. Remember to allow for growth and change and to follow a logical structure when laying out your Department numbering. Perhaps all Operations Departments have the first digit of 1 (100 Personnel, 150 Administration, 160 Facilities, 190 Debt Service, etc ), Ministry Departments begin with 2 (210 Pastoral, 220 Children, 230 Students, 240 Adults/Community, etc ), Mission Departments begin with 7 (710 Local Mission, 750 Overseas Missions, etc ) and you follow a similar plan with your other departments, if you have several. 10

11 Using Account Groups for Totals and Sub-Totals Creating totals or sub-totals in the chart of accounts is accomplished by using Account Groups. Account Groups can contain a range of accounts or the Account Group could contain other Account Groups (making those Account Groups a sub-total within the total), but it cannot contain only part of another Account Group. An Account Group by default is contained within a Department, use the Cross Level option to total accounts in multiple Departments. Creating an Account Group Navigate to the Chart of Accounts (General Ledger > Modify > Chart of Accounts) to create an Account Group. You then click the Add Group button at the top of the screen. 1. Go to the Department where you will need the total, then key an account number in the Starting # to determine beginning point for the group s account range. 2. Use the Ending # to enter a number to determine which accounts are included. In the next section we will cover how checking the Cross Levels checkbox will change this option and how that is used. 3. Give the Account Group a Name. This name will be used for the Heading and the word Total will precede this name for the total line in reports. (Income will become Total Income and Expenses will become Total Expenses ) 4. Choose the Account Type. This will control the way totals will show (negative or positive) depending on what type is chosen. Income will show a credit balance as a positive number. 5. Choose whether to show the Heading. 6. You can click the Add to Levels button to add this group to 2 or more levels, at once. 7. Click Apply to add this and other Account Groups or OK when you are finished. 11

12 Creating a Sub-Total for Income within a Group Creating a Sub-Total for Expenses within a Group 12

13 Using a Cross-Levels Account Group When you need to total the activity in more than one Department or Level within a Fund, then you need to check the box to Cross Levels within your Account Group. The Cross Levels option allows you to create a group that totals across levels in your account structure. This is only applicable to Budgeted Levels (Location, Cost Center, and Department). When using this option, a total line is created for display in reports. It displays total amounts based on the ending level selected as well as the account number. Add this group in the department from which you want to start totaling. Once the option for Cross Levels is selected, select an ending level and enter an ending account number. The Starting # and Ending # fields do not have account selectors so that they can be used as a range. If you create new accounts within this range, they are included in the total as well. The following reports display Cross Level Group totals: Statement of Activities, Budgeted Financial Statement, Financial Spreadsheet, Comparative Trial Balance, and Preliminary Budget. What some miss on this simple tool is that it is necessary to create this Account Group in first Department that you want totaled. You would then use the Department Name and Ending # fields to add the ending Department and Account # for this grouping. 13

14 Cross-Levels Account Group for Ministries of Fund 1 Church Cross-Levels Account Group for a Net of Fund 1 Church NOTE: If you need a Net total for the whole fund, there is a much easier way to accomplish that by using the Show Totals for Each Level checkbox in either the Budgeted Financial or Statement of Activities report. Other things to remember if you check the box to Cross Levels: It is best not to check to Show Heading Unlike a normal Account Group you should add the word Total at the beginning of the group Name. 14

15 Using Sub-Accounts Often there are situations where a department needs to track detail that is not needed when reporting to the board or for regular monthly reports. A great option that would help with this is sub-accounts. A sub-account is in every way just like a regular account, but these accounts have the option of rolling up into the main account when you run reports so that budget and actuals for each sub-account will total into the main account if the option is chosen to not show sub-accounts. Sub-Accounts can be used to track many types of activities that are specific to a larger whole. This will allow you to narrow the focus when needed, but summarize the activity when needed. You could also use sub-accounts to track different sub-entity s activity within a larger summary, such a ministries or campuses as a subset to a main account. However, to then summarize all activity by that subset, you would need to use the Special Reports to narrow the focus of your monthly reports to that sub-account for those various accounts. 15

16 Copy a Fund to a new Fund As you are setting up or revising your Account Structure or Chart of Accounts, you can make good use of the option to copy departments and accounts from another Fund. Choose Copy from another Fund when you first create the new department. This will not be available when editing or updating the department. Copying a Department to a new Department As you are setting up or revising your Account Structure or Chart of Accounts, you can make good use of the option to copy accounts from another Department. Choose Copy from another Department when you first create the new department. This will not be available when editing or updating the department. 16

17 Copying standard Accounts to multiple departments Use the button when adding a new account to create this account in multiple departments or levels simultaneously. This button is only offered when you first create the new account. Once the account is created, this will no longer be an option, however, you can use the next feature to copy an existing account number into other levels. Controlling account number usage Checking Account Usage Instead of copying the accounts from another department or copying a new account across multiple departments, there is now a utility which will allow users to take an existing account and run a check to see where that same account number is used. 17

18 If the same account number in a different department has a different description, then the user can click Change Name? To make it match. If the account number does not exist if other departments, then it can be added to any other department by checking the box in the Add? column. 18

19 Change an Account Number This is much simpler than it was in Shelby v.5. All that is necessary is to open Chart of Account > Navigate to the Department, then the Account number. Click the pencil icon to Edit Account information. Here you can just change the number, name, closing account, or even the Account Type. Move Account to Another Department There is a simple utility to Move Account to another Department or level within a Fund. Hover over Utilities, then click Move Account and choose the Account to Move then the Department in the Where to Move field. 19

20 Move Account Structure To move a Fund to another Fund Group or a Department to another Cost Center (or Department Group), you can use this utility, but this will not be available if you ONLY have Funds and Departments. 20

21 Some Designs and Scenarios to Consider Funds and Departments Four funds (Church, School, Missions-Donor Restricted and Campus Projects-Donor Restricted) 21

22 Cost Centers and Departments with no Funds Cost Centers renamed as Ministries (Balance Sheet (defaults to 0, Income, Operations, Ministries, Missions, Non-cash, Donor Designated) 22

23 A Multi-Campus Church Fund Groups, Funds, Cost Centers, & Depts Using Fund Groups for Campuses (with multiple Fund per campus) and Cost Centers for Divisions within each Fund (within each campus) Description Level 1 Memphis Campus 1 General Fund 0 Balance sheet Division 0 Balance Sheet Department 1 Church Division 10 Income Department 20 Personnel Department 30 Operations Department 40 Children's Ministry Department 50 Youth Ministry Department 60 Adult Ministry Department 90 Non-Cash Department 2 Preschool Division 10 Income Department 30 Operations Department 100 Personnel Department 120 Class Expenses Department 140 Scholarships Department 2 Designated Fund 0 Balance Sheet Division 0 Balance Sheet Department 10 Designated Giving Division 10 Designated Gift/Short-Term Department 30 Foreign Missions Department 50 Short-Term Missions Department 3 Building Fund 0 Building Campaign Division 0 Balance Sheet Department 10 Income Department 30 Expenses Department 2 Cordova Campus 1 General Fund 23

24 A Multi-Campus Church Cost Centers & Depts Using Cost Centers for Campuses with similar Departments within each Cost Center (only one balance sheet needed) Cost Centers named as Campus. 24

25 Several Other Styles in Help Files There are other configurations of Account Structures (Charts of Account) that can be imported as you begin a new year. You will find a PDF version of each in the Help Screens under the topic Years and Periods as these templates are available to be applied as you create a new year. Actions Steps -- ECFA Consider if the chart of accounts meets current needs Create a check list of required reconciliation Complete risk assessment and review internal controls Determine how current financial reports meet the needs of various audiences Consider the involvement of a third party 25

26 Q&A Class Discussion 26

27 Dave Heston Shelby Independent Consultant Trainer photo Dave served as an accountant for a Phoenix-based CPA firm before he joined the staff of his church in Over the last 40 years Dave has served as an administrator at three churches in the Phoenix metro area. Dave recently retired as the Director of Finance for Phoenix Seminary in AZ. Dave has been a Shelby user since 1985 and trains as a Shelby Consultant training on Shelby v.5 and ShelbyNext Financials.