How Is Dimensional Accounting Software a Must-Have for Churches?
I'm excited to follow up Baran Sonmez's recent blog post on Dimensions in Accounting Software with a look at how dimensionality is particularly important in the world of churches and faith-based organizations. For some background, I'm a Professional Services Manager at AcctTwo. As a tax accountant, programmer, and Intacct reporting and implementation specialist, I've spent more than 25 years in finance and technology, particularly church finance, and I've held financial analyst and finance director positions at two churches in the Dallas/Fort Worth area. I have a little experience with this!Nearly all churches, especially growing ones with expanding operations, have ministries. They may have fewer than ten, or they may have dozens. These ministries might include Music, Worship, Children, Youth, and many more. Often they have hierarchical relationships where one ministry might roll up into another one. We typically see 2-3 layers of hierarchy, but have also seen as many as nine!
In the world of legacy church accounting software - think QuickBooks, ACS, or Shelby - there's no structure that allows a church finance team to track and report by ministry without creating separate accounts for each of these segments. Segments can also include other key elements for churches, like locations, restricted and unrestricted funds, seasonal activities, bookstores, cafés, etc. Adding a separate account for each segment creates an unmanageable chart of accounts. We've seen churches with as many as 400 accounts all the way up to more than 2,000! When churches expand to new locations, the number of accounts starts to double and triple.
The real impact from such an unwieldy chart of accounts is on reporting.
When reporting out of legacy software systems, these segments generally can't be selected individually or in groups. You tend to get everything. This is where spreadsheets start getting heavy use. Church finance folks are some of the most talented Excel users you'll ever find because of the complexity of providing reports for all the ministry leaders they support. As great a product as Excel is, there are dangers to using it as a financial and operational reporting tool. Manual manipulation can lead to mistakes. Sending spreadsheets back and forth presents version control challenges. And let's not forget the tremendous amount of work it takes to do all this data manipulation, and in the end, the data isn't even real-time or current.
What can be done about it?
Modern accounting solutions, like Intacct, are architected in such a way that you can create "Dimensions" for the various ministries, departments, locations, funds, grants, and other segments. Transactions can be tagged to a certain Dimension. Controls can be put in place that limit the options for a given transaction or user, which helps maintain accurate data. As a result, reporting is a much simpler and more powerful process. Individual or multiple Dimensions can be selected for reporting. Budgets and spending can be seen by ministry, or if a certain ministry leader is responsible for multiple ministries and even multiple locations, he or she can see the data that applies to him or her, and church leadership and members of the board can get a higher-level view of the financial data.
Dimensions go beyond the financial.
Systems like Intacct can also present operational data alongside the financial information, so churches can look at attendance by service time and location, as an example, or staff to attendance ratio. Operational data can be loaded into the system via a file upload, or Intacct has powerful APIs that can connect the accounting system to other systems and bring in that data automatically.
I'm going to get a bit more specific in my next post and also talk more about fund accounting, restricted, unrestricted, and temporarily restricted funds. Stay tuned.