One of the key needs for nonprofits in fund accounting is the ability to have an efficient means of maintaining balanced books when reporting requirements call for it. Having a flexible self-balancing chart of accounts structure is important. It’s important to count on your accounting software to address specific needs such as tracking and reporting on individual funds from multiple sources and complying with FASB, GASB, and other reporting requirements.
Setting up your chart of accounts is a critical piece of your nonprofit accounting system.
The chart of accounts enables nonprofits can categorize every financial transaction for the organization. A strong chart of accounts also ensures transparent and valuable reporting for audits, stakeholders, grants and donors. The chart of accounts also help you set a level of internal controls and customize reporting for outside funding sources. Chart of accounts will include assets, liabilities, Net Assets, fund balances, revenue and expenses for you nonprofit.
The table-driven chart of accounts structure in MIP Fund Accounting is a benefit to nonprofits and government organizations. By enabling a customizable chart of accounts, organizations are able to reduce the work hours spent on manually entering each possible string of account combinations for every new source of funding. For each new project, organizations can record funds, grants, programs, contributors, and more with an unlimited number of segments.
Here are some key questions to ask when you’re considering whether or not your current software has a flexible chart of account structure:
- Do you have the option of number of unlimited segments?
- Is there a limit on your total length of account code?
- Can you use numeric and alpha codes?
- Can you apply business rules to each segment to define which should balance and define closing rules?
MIP Fund Accounting’s segment structure and business rules ensure that users are entering their data accurately to completely meet their complex financial reporting needs.
While other systems may allow segmented chart of accounts, without the business rules (detailed above) those segments are just placeholders for data. This means users have the burden of ensuring it’s entered in a way that meets their reporting requirements.
MIP enables you to configure each segment individually. This allows new codes to be added on-the-fly (e.g., new program code). Users are not required to build valid combinations of accounts, keep in mind too they can be enforced for control purposes if needed.
MIP Fund Accounting’s chart of accounts helps users save time. Additionally, MIP Fund Accounting gives users the capability to generate complex reporting needed for those unique FASB and GASB financial statements, including reporting across fiscal years. With MIP you can track functional expenses, track nature of donor restrictions on Net Assets and count on expedient and easy transaction creation.
The largest goal in utilizing a flexible chart of accounts is that is to make sure all your financials stay organized and that your reporting to key stakeholders is valuable and in real-time in relation to your budget. Your chart of account will tell the story of your mission and your main activities in your nonprofit. When you have an organized chart of accounts, you will also be able to see at any given time who your major donors are, what grant amounts you are receiving and which expenses you can reduce over time.
We’re here to help you work smarter, not harder. Please visit our main page for more information on how MIP Fund Accounting can be a powerful solution for your nonprofit.