From movies to medical implants, 3D technology has revolutionized many aspects of our lives. Adding another dimension allows us to play, work, and live in new and innovative ways never before possible. The same is true with business finance, particularly when working with the chart of accounts (COA). Dimensions can deflate a bloated chart of accounts, transforming it into a lean, agile system that operates on accuracy, not errors. Most importantly, dimensions allow finance to deliver meaningful insights in minutes, not days.
A chart of accounts is a listing of all accounts—assets, liabilities, revenue, expenses, etc.—that are used in the general ledger of an organization. The accounting software uses the chart to aggregate information into the company’s financial statements. A best practice for working with your chart of accounts is to keep the size manageable. However, as your company grows and new product lines, levels of services, or departments are added to your chart of accounts, manageability becomes a real issue.
Consider these questions:
- How easy is it to decide which account to use, fix errors during close, and report on your chart of accounts?
- What happens when you want to filter transactions by multiple factors, like item, customer, and location?
- Is that inflated chart of accounts keeping you from getting at the answers your company needs?
Doing business better with dimensions
Dimensions make it easier for you to set up and use your chart of accounts. Instead of setting up expense accounts for each of your departments, you can set up a single expense account, and then use the “department” dimension to filter by individual departments in your reports.
Dimensions help you enable real-time reporting by pulling information across various aspects of your business. For example, using dimensions, you can look at revenue for a particular item and a particular customer. By actively applying dimensions, you can analyze your business in ways not possible with a typical chart of accounts.
At their core, dimensions enable you to independently tag transactions by any combination of dimensions you choose to enable. Instead of hard-coding individual accounts, you can slice and dice your information to create more focused analysis.
Your accounting software may allow you to rename and repurpose standard dimensions or create custom dimensions. If you have a nonprofit organization where you work with various funds, you can rename a “class” dimension to the “fund” dimension and use it to track revenue and expenses against your different funds. Or suppose your business centers around projects. You can tag projects in all your transactions and analyze profitability project by project.
Bottom line: by tagging multiple dimensions as you enter transactions, you can capture more granular operational and financial data tailored to your business. Dimensions offer flexibility and visibility, transforming your standard “2D” chart of accounts into an agile powerhouse of insight for your business.