If you're a CFO, it could be your most valuable resource for controlling your financial information.
What is a Chart of Accounts?
The Chart of Accounts (COA) is a financial indexing system that manages the quality of your organizations financial data. It does this by using a string of numbers to represent information associated with your accounts. These attributes can be defined by an organization, making it easy for staff to search and pull together information for various purposes such as reporting or analytics.
For example, the string 1-271-21101 can tell us that this account:
is in the General Fund.
is an Expense.
reports under the ‘Parks and Recreation’ category of your Financial Statements.
is managed by the Parks department.
tracks all spending associated with a Town's trails.
By using the COA, Finance can generate their deliverables at a faster rate and with greater accuracy.
Why is it important?
A COA is essential for many reasons, some of which include helping staff know where to code invoices, building financial reports, and streamlining processes that would otherwise need to be done manually.
Because Municipalities have many systems that depend on financial information (such as Payroll, Asset Management, Budgeting, Financial Statements, Financial Plans, etc.), the COA is also vital for transferring data between systems. Whether it is being done manually or through a 3rd party mapping platform, it is the foundation to your organization’s finances.
Another way to look at it is to imagine if it didn’t exist. You would need to search account descriptions and transaction history for each account to determine what it is. This would be both time-consuming and create huge vulnerabilities to human-error.
Why do we need a Standard?
Due to the compounding problems of poorly designed or outdated Chart of Accounts, many Municipalities will eventually invest time and money into upgrading their COA. This is done both in-house, or by hiring consultants.
While one-off, bespoke upgrades can clean-up your General Ledger and address some of the most glaring challenges, they will likely degrade over time due to lack of support/documentation, no quality controls, missed design considerations, new reporting requirements, and staff turnover. Leaving CFO’s back at square one.
By introducing a standard there is no design work required. This has already been done for you, making it quick and easy to adopt. The Municipal 360 COA standard was built in and for the real world by your Municipal Finance peers and industry professionals. This gives you a huge advantage and will save you from trying to re-invent the wheel.
In addition, by implementing a common framework, Municipal Benchmarking can be achieved with greater accuracy. Say goodbye to apples to oranges comparisons and enjoy richer analytics.
At Municipal 360, our goal is to empower CFO’s to achieve their objectives by removing the pain caused by dated COA designs and help advance the municipal finance industry by establishing a standardized financial framework.
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