Budgeting and The Chart of Accounts

With budgeting season near, thoughts move to spending for next year, despite recently ending the last. While everyone else is thinking dollars, the accountant is thinking about their chart of accounts. Typically now is not the time for a change, but budget preparation sometimes leads to contemplation about how or where your chart might be improved. Budget preparation often uncovers chart deficiencies or future requirements that may be hard to fulfill with your current structure.

Let’s get this out of the way: no one is fully satisfied with his/her chart of accounts, and no chart is perfect or will meet every need. Your chart is often a compromise between manageability and a reasonableness of detail. You can’t deny your chart is critical to tracking and reporting your finances accurately with the budget a large part of it. Plus, there’s the never ending "battle" to keep pace with competing requirements. So to answer the question in the back of your mind, you’re not the only one struggling or wishing your chart was different, expanded, simpler, and/or more consistent. But what can be done?

Step one: Embrace Change

In many ways your chart of accounts is a paradox. It’s a fixed number of segments and codes while your needs and reporting requirements constantly change and evolve, often unpredictably. Can you prepare next year’s budget report request for the Finance Committee Chair by combining fuel expenses into a single cost code, while tracking it by each department in the current fiscal year? Maybe, maybe not. But, do you have to?

"Give a man a fish and he eats for a day. Teach a [Insert dept. head name] how to read a ‘Budget to Actual’ report…"

Is it possible your chart is not the problem? Stakeholders in Town or City Hall will have different accounting and reporting needs. Further, each comes with differing backgrounds or experience in finance. A little information goes a long way when it comes to account coding and usage. Educating your counterparts regarding how their accounts are coded, structured, and used benefits everyone. Budget season could be a good time to begin this education. At the very least, these "users" must know what they are looking at. It’s not a matter of training "accountants" as much as it is creating better consumers of the information you work hard to provide on a regular basis. Make them partners in the process and give them the resources and information to succeed. There is both give and take regarding what makes sense for these users, what you need, and ultimately the needs of "higher-ups". All interested parties may have different needs, but they need not be competing or at odds. A coordinated effort to use and understand your chart of accounts, by the people who depend on it could help alleviate many conflicts and questions you deal with on a regular basis. However, no amount of education can overcome some fundamental chart and account limitations.

A chart of accounts is truly a balance between simplicity and need in the short term and with an eye to the future. Do you have it, or can you get it? Make the most of your chart in the present while planning and laying ground work for future change. Then, you’ll realize its full potential. If you do think that a fundamental overhaul of your chart is something you need to do, now is the time to begin thinking about those needs and possibly laying the groundwork with everyone affected. Changing your chart is possible, and may be necessary. Success, in a large part, can only be guaranteed with a lot of design and planning. If you have the need and are up to the task, next time, we can delve into some different options for "making" your chart what it needs to be.

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