Shrinking and Expanding Microsoft Dynamics® GP’s Chart of Accounts Structure – Part 3

In this three-part series we’re looking at the heart of the Microsoft^® Dynamics GP system, the Chart of Accounts. The structure is difficult to shrink once implemented, but can be much more easily expanded. Careful analysis of the structure will ensure a balance between current financial reporting needs and future growth. The Professional Services Tools Library (PSTL) and third-party products are available to make shrinking or expanding more user friendly.

In the first post, you saw an explanation of the standard functionality, and in the second post, I tempered that explanation with my first five recommendations.

Segmentation Capabilities and Consequences

Based on thousands of implementations, Computeration offers the final five  explanations and recommendations on how to create a powerfully simple chart of accounts.

Recommendation 6: Allow space for the addition of new accounts

Number accounts as follows:

5010
5020
5030
5100
5200
5300

This allows 10 numbers between your initial accounts and occasionally skips nearly 100 numbers.

Recommendation 7: Start chart of accounts design early in the process

You’ll need the accounts for nearly every other module. So start early, remain flexible, and provide for space.

Recommendation 8: Start chart of accounts design early with the financial reports

Design your chart backwards from your financial reports. Your chart ultimately represents how you want to report the data. I’ve seen many companies that designed the chart based on other criteria and defer consideration of how they want their reports to present the data. Then they design financial reports at the end, creating what we call “spaghetti code” having to substantially re-sequence and re-group accounts.

Balance that design of the accounts between reflecting the sequence they appear on financial reports and making them easy to find during input of transactions.

Recommendation 9: Create your chart to facilitate preparation of the Cash Flow Statement

This recommendation deals with fixed assets and long-term liabilities. It’s very common to create a sequence such as:

1500     Furniture and fixtures
1510     Equipment
1520     Vehicles

If instead you create this sequence, you can automatically generate the Cash Flow Statement without editing it in Excel.

1500     Furniture and fixtures, Increase
1510     Equipment, Increase
1520     Vehicles, Increase
1550     Furniture and fixtures, decrease
1560     Equipment, decrease
1570     Vehicles, decrease

You would group the increase accounts for the line in the Cash Flow Statement for use of funds and the decrease accounts for source of funds.  Doing this rather than depending on selecting only debits or credits from an account accommodates for accounting adjustments that are quite common in your fixed asset accounts—someone capitalized something that doesn’t meet criteria.  Management Reporter and FRx allow you to select just debit or credit entries, but in the case of adjustments, your cash flow statement won’t be correct with those concepts

Recommendation 10: If you didn’t do it right the first time

Use PSTL (Professional Services Tools Library) or Corporate Renaissance Group’s Changer to move detail to a new account format.

Looking for more information on your Chart of Accounts? See the discussion on “Adding a Dimension to Your Existing Chart of Accounts” in our IFRS Accounting series.

By Gloria Braunschweig, The IFRS Implementation Expert for Dynamics GP, with Computeration, a Pacific Northwest Microsoft Dynamics GP Partner

Computeration specializes in ways to enhance your company’s solutions with Microsoft Dynamics GP in Idaho, Oregon, and Southwest Washington, with clients around the world, Computeration makes your implementation successful by offering experienced project management, data integration, training, and consulting services.