November 12, 2020
The Importance of a Dimensional Chart of Accounts for Finance
Posted by Todd Bowlsby
If you want to easily track the profitability of each department, branch, project or just about any other aspect of your organization, you’ve been out of luck…until now with dimensional chart of accounts.
The dimensions capability within modern accounting software solutions (aka multi-dimensional accounting) now allows you to track revenues, expenses and profitability for any department, location, customer, vendor, employee, item, class and project while also simplifying your chart of accounts — from setup through real-time reporting. With this flexible financial foundation, you’ll gain insights that speed decision-making.
Chart of Accounts Simplification
Most accounting software applications use a hard-coded structure for your chart of accounts. For example, to track three departments, five projects and five customers, you’d need 75 account code combinations — and you’d end up with a complicated, unmanageable set of codes. Adding new ones could also force you to add hundreds of additional accounts on top of that.
With an accounting software solution that uses a dimensional chart of accounts, this becomes simplified. You only need to set up your primary account codes, and there’s never a need to add hard-coded segment combinations. With Sage Intacct, for example, you get eight standard dimensions out-of-the-box and an unlimited number of dimensions can be added. Once created, you can use dimensions for any transaction — general ledger, receivables, payables, purchasing, time entry, expense entry, fixed assets and more.
Using dimensions fundamentally improves reporting, making it easier for you to get answers fast, and it’s simple to view performance from any dimension. As you create reports, simply use drop-down lists to filter, group and organize your data by dimensions. For example, you can go from a standard income statement to profitability by project or revenue by geography with a few clicks of the mouse.
As you look to modernize your technology stack, which might include your accounting software platform, consider using dimensions versus a standard linear chart of accounts so you can empower your team with real-time information and enable your business leaders to make informed decisions quickly.
To learn more about dimensional chart of accounts, watch this short video about dimensional chart of accounts or email [email protected].
Todd Bowlsby is a Manager with Armanino in the Technology Consulting Group. He holds degrees in both accounting and information technology, and was an accountant and CFO for 15 years. For the past 18 years, Todd has been enjoying helping organizations of all kinds through his sales, marketing, and consulting efforts. Todd not only has real-world experience as an accountant, but has personally performed over 300 implementations, most of which were in the financial management arena.