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SPEND MORE TIME ANALYZING - BEST USES FOR FINANCIAL ALLOCATION

Kathy Kim and Rick Zich

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GPUG Member for 4 Years! Favorite benefit: webinars, lunch and learns, and forums Work and Fun : Beer and Motorcycles ERP:

– Major-Dynamics, SAP, Baan, – Minor- Visual, Misys, pcMRP, Xtuple

eCommerce:– Coresense, Magento, Woocommerce, Volusion, Shopify, Pixafy, Others

RICK ZICH PRESIDENT, MR BEER

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GPUG Member for 3 Years! Favorite benefit: webinars, chapter meetings, collaborate Work and Fun : Organ and Tissue Donation, RV Travel GP:

– GP Modules: G/L, A/P, A/R, Fixed Assets– ISV- Collections Management, KwikTag

Other:– Integration Manager

KATHY KIMDIRECTOR OF FINANCE, DONOR NETWORK OF ARIZONA

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What are Allocations– What do they do– Pros / Cons

Variable Allocations– Explanations / Examples

Fixed Allocations– Explanations / Examples

COURSE PLAN

WHAT IS AN ALLOCATION

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Why?Many companies “departmentalize” their financial statements. By that I mean, they have a Chart of Accounts with a segment for the department so they can easily run Income Statements showing profit and loss for each department. However, what happens when the CEO wants to allocate those Administration Department costs to the “revenue-producing” departments?

WHAT IS ALLOCATION

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It is an account– What do they do– Automatic

History of allocations in GP– Standard and advanced allocations

Warnings– Plan, plan, plan (buy in and align)– Review

WHAT IS ALLOCATION

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Pros– Simplifies as you will no longer need to code to departments– Minimizes errors– Easier to train– Less data input– Easy to setup and change

PROS / CONS

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Cons– Can get out of control if not setup correctly– Year over year analysis may be compromised– They do not store history– You cannot report on them– Accidental deletion is possible– Cannot see the original posting

• Use a clearing entry as well• Do not offset the source account

PROS / CONS

FIXED ALLOCATION

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The easier of the two Least flexibility of the two Best starting point Excellent for:

– Overhead posting– Maintenance / Utility cost posting– Budgeted amounts known– Direct / Indirect

FIXED ALLOCATION

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Setup – Financial > Cards > Fixed Allocation– Put in Allocation account #– Enter description– Add note to further explain– Choose Posting accounts– Enter Percentages for each

FIXED ALLOCATION

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Setup Result– Segment 99 is allocation– 100-68030-99 will always

be a zero balance acct.– 400 segment is 50%– 500 segment is 25%– 600 segment is 25%

FIXED ALLOCATION

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GJ Entry Result– Cannot view 100-68030-99– 400 segment is 50%– 500 segment is 25%– 600 segment is 25%

FIXED ALLOCATION

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Use Case: Salary allocation with ADP payroll

– Fixed allocation versus allocating in ADP– Fixed allocation is easier to change – Fixed allocation loses the original entry detail– ADP allocation – can also be difficult to trace detail

FIXED ALLOCATION

VARIABLE ALLOCATIONS

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Let’s talk about unit accounts– What is a unit account?– What does this have to do with variable allocations

Many different areas– Payroll: FTE unit accounts– Cost per unit (donors, organs, etc.)– Square Feet– Reporting in addition to variable allocations

VARIABLE ALLOCATION

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What are Allocations– What do they do– Pros / Cons

Variable Allocations– Explanations / Examples

Fixed Allocations– Explanations / Examples

VARIABLE ALLOCATION

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Constantly changing % Costs per department are based on usage Other?

Solution: Use Unit accounts with variable allocations

VARIABLE ALLOCATION

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First step is to ensure that you are using Unit Accounts A variable allocation account (Financial>Cards>Variable Allocation

Account) is set up with distribution (posting) accounts for each department.

Each distribution account is linked to a breakdown account. In this example, the breakdown account is the unit account for square footage

VARIABLE ALLOCATION EXAMPLE

At Mr Beer we send out millions of email messages a month. This comes from the sales department and from the marketing department. An email has a cost associated with it. We already enter the number of emails into our unit account information for each department.

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When a transaction is posted to the variable allocation account, an amount is apportioned to the distribution accounts based on balance in the breakdown account, or unit account.

The expense amount is recorded to the variable allocation account and the transaction is posted. When a transaction is posted to any variable account, the system automatically records the appropriate amounts to the distribution accounts. No amount is actually posted to a variable allocation account.

VARIABLE ALLOCATION EXAMPLE

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Financial>Cards>Variable Allocation Account

Enter the period to base the transaction on

Enter Dist accounts and associated breakdown USING the unit accounts as the Distribution accts.

SETTING UP VARIABLE

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RESULTS

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RESULTS

ADVANCED USES

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When?– Monthly– Weekly / daily

Why– Control the timing– Minimal visibility for budget watching

CLEARING ENTRY

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How? – Financial >Transactions > Clearing

CLEARING ENTRY

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Result

CLEARING ENTRY

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What?– Negative department– Different offset accounts

NEGATIVE DEPARTMENT

QUESTIONS?

Contact: rickz@mrbeer.com or kathyk@dnaz.org