A Chart of Accounts (COA) serves as the foundation of any municipality’s financial management system, but if the design degrades or is no longer current, it can quickly spiral, leaving a trail of manual workarounds and challenges for finance teams.
These manual workarounds and challenges can present themselves in various ways: they take staff time away from critical projects, create complex manual reporting processes, increase software maintenance needs (ensuring data is up to date and accurate), and cause delays during year-end audit. Not only do these have a cost (time and money) associated with them, but they also can take put a strain on staff, increasing stress and fatigue.
In this article, we want to highlight these impacts as they are often so common, they become routine. However, by examining them, finance teams can gain a clearer picture of how improvements can be made.
To begin, it’s suggested to review reporting as this is an area that can be greatly impacted by the COA. Here are a few questions to ask:
Which reports are manual, and which are automated?
Are manual validations or checks required?
How frequently are reports produced, and what steps are involved?
If reports are automated, are your account codes aligned with reporting categories?
These questions serve as a starting point to assess where time loss may be occurring and where automation can be introduced. When it comes to the 'mechanics' of the job, such as data collection, management, and reporting, automation can streamline processes. However, without a clean structure, many software applications are unable to perform as needed.
By establishing clear segments in your COA string, you create built-in intelligence that both you and your software can use to generate reports and provide insights. A clean structure lets you leverage the tools you’ve invested in without being limited by them. For instance, you may be able to generate variance reports by department using your software, but if you need a summary of fleet expenditures and there is no reporting option in the software, you can export your information to excel to easily filter on the account codes.
Another key consideration is data accuracy. If you're facing reporting challenges, it's likely you're also dealing with coding errors. When accounts are difficult to understand, errors can easily slip into your general ledger, sometimes going unnoticed or creating a backlog of corrections that need to be addressed. The solution is either learning the intricacies of your existing COA or restructuring it to ensure the codes are intuitive and easy for staff to use.
While a COA restructure may seem daunting, there comes a point where the benefits far outweigh the costs. Starting with a COA assessment can help uncover key issues and offers a great opportunity to engage your team in identifying what improvements can be made.
For information on Municipal 360's Standard COA design and implementation services, please Contact Us.
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