Configure Accounting Subledger

Learning Objectives

After completing this unit, you’ll be able to:

  • Explain key accounting terms.
  • Bring together fundraising and finance to make decisions about your Accounting Subledger settings.

Get Ready for Group Work

Accounting Subledger translates fundraising and other revenue into the language of accounting, but first you’ll have to do some old-fashioned translating between teams. Finance, fundraising, and your Salesforce admin all have a role in making decisions based on your organization’s technology, processes, policies, and people.

At our (fictional) nonprofit, No More Homelessness (NMH), Finance Director Sam Aquino, Development Director Aniyah Thompson, and Salesforce Admin Gorav Patel work with a consulting partner to make sure Accounting Subledger meets their needs.

But first, it’s Sam’s time to shine as she helps Aniyah and Gorav understand the language of accounting. 

Sam stands at a white board with key accounting terms “debit,” “credit,” and “accrual” as Aniyah and Gorav take notes.

Accounting Subledger isn’t technically complex to configure—it’s just one page of settings—but each decision must be thoughtfully made to align with your organization’s accounting policies and processes. It’s good for everyone to understand the basics of accounting under normal circumstances (yes, really), but especially when setting up Accounting Subledger.

The Basics: Debits, Credits, and Accounting Decisions

Here are some accounting terms, and Accounting Subledger-specific vocabulary, that you should know.

Debits and Credits

Accounting Subledger, and accounting as a whole, runs on a system of debits and credits. These are specific pieces of accounting information that exist together in balance—every debit has a corresponding credit, every credit has a corresponding debit.

Think of this in terms of an accounting ledger with a left and a right side. Debits are on the left and credits are on the right, and they modify revenue, assets, liabilities, and other accounting figures in different ways.

Here’s a basic example of how a straightforward cash donation is recorded with Accounting Subledger. (We’ll dive more into specific examples in the next unit, so stick with us.)

Debit Credit

$200 transaction

$200 payment to the general fund

Cash and Accrual Accounting

Not all donations are immediate cash transactions, though. What about a pledge? This is where cash accounting and accrual accounting come in.

In cash accounting, income and expenses are accounted for only when they are received or paid. So if you have a pledge or recurring donation, it would only be recorded to your accounting system when the money is in hand.

Accrual accounting, meanwhile, records income or expenses when they’re agreed to or incurred. For example, you would record an entire pledge when a gift agreement is signed, then update that record as each payment is made.

Accounting Subledger supports both.

Revenue States

Revenue states are what help Accounting Subledger generate the information you need for cash and accrual accounting.

  • The Committed state means that revenue has been promised and the organization expects to receive it. If you use accrual accounting, this is when the revenue would be recognized.
  • Uncommitted is any revenue that isn’t yet promised, such as a planned fundraising ask. You’ll want to set all of your opportunity stages before a gift is promised or made to Uncommitted.
  • Finalized means you don’t expect any other activity on an opportunity, like when it’s paid in full or written off because it’s been cancelled by the donor.

With some accounting knowledge, the NMH staff is ready to start making decisions about when and how accounting data is generated by Accounting Subledger.

Make Choices About Technology

Any time you’re trying to connect two systems it’s important to understand them both and how they connect. Here are key questions to think about with Accounting Subledger.

What accounting system do you use and what information does it require to import ledger entries? You can choose what information about a donation is exported to your accounting system through custom accounting field mappings and help from your admin or consulting partner. NMH is keeping it simple, but if you have more detailed needs you can check out the Configure Custom Accounting Field Mappings link in the Resources section below.

Do you want a direct connection between Salesforce and your accounting system (like an API), or do you prefer manual exports? Sure, an API is convenient, but a lot of finance teams don’t like auto-posting to their accounting system because it could create audit risks. Many prefer a manual export to check the data first. That’s what NMH decides to do.

Answer Questions About Processes and Policies

The team at NMH starts by mapping their entire fundraising and accounting processes from end to end to see where they meet, where they diverge, and how they apply to Accounting Subledger. Then the team answers these questions.

What types of revenue do you want to export from Salesforce? Accounting Subledger allows you to determine which opportunity record types generate accounting data. For example, NMH records ticket sales from its gala in opportunities in Salesforce for a complete view of its donors, but generates the accounting data from those sales from its ticket-sales system. NMH chooses to ignore those opportunity types in Accounting Subledger to avoid double-counting revenue.

At what stage should a gift be recorded? This is where cash and accrual accounting and revenue states come in. Most of NMH’s opportunity statuses don’t mean anything to accounting and are just for fundraising processes. So NMH decides to create accounting information only when a gift is pledged (Committed) or paid in full (Finalized) to meet its requirement for accrual accounting. Your opportunity stages may be a little different, so you can map them however you need.

Here’s how NMH’s stages for a donation opportunity map to accounting states:

Opportunity Stage Accounting State

Prospecting

Uncommitted

Pledged

Committed

Closed Lost

Uncommitted

Closed Won

Finalized

Withdrawn

Finalized

What general accounting units are needed and how do they map to your accounting system? A general accounting unit (GAU) is a fund that you designate for specific use or to meet restrictions set by a donor, grantmaker, governing agency, or as required by law. You should start by deciding on your default GAU for Accounting Subledger—NMH chooses its general fund—and then determine how you need to map the GAUs in Salesforce to those in your accounting system.

When should ledger records be generated? Ledger entries are created when an opportunity or payment reaches a certain stage, and then every time those objects change. This can happen either immediately (triggered by the change) or in a batch process at a set time (like overnight after all data is entered for the day.) NMH’s consulting partner suggests a nightly batch to limit the number of records created. This avoids situations like the one you can see below, where a fundraiser makes several changes to a pledge in the same day (due to typos, donor requests, or both) and creates six records when only two would do. 

It’s this:

Six ledger entries: two for the initial $2,000 pledge, two for a $500 increase, and two for the $100 typo correction

Versus this:

Two ledger entries: one for a $2,600 debit and one for a $2,600 credit

You may want to show that full record trail, but just remember that Accounting Subledger creates a permanent record with every change.

When do accounting periods begin and end? You should plan to start using Accounting Subledger at the beginning of your next accounting period or set it to write ledger entries from the beginning of your current accounting period to limit manual work and make sure you don’t miss any data. Remember that you get to turn Accounting Subledger on only once! This question is also important in the Growth edition of Accounting Subledger, which allows you to create entries for each of your accounting periods.

What other processes need to be adjusted? It’s time to revisit your fundraising and accounting processes from start to finish. What else needs to change? NMH’s consulting partner finds something that’s fairly common to other Accounting Subledger users: The organization set up a custom checkbox field on opportunities to mark if they’re finalized. That status is built into Accounting Subledger and automated to update when a pledge is paid in full, so NMH can remove that field.

Focus on the People

These questions may come last here, but they are critical to success with any technology. The technology and processes work in service of your staff—and the people you serve through your mission—so spend time determining what you need to enable your staff and make the most of any new tool.

Some questions to consider:

  • Who will own and perform the manual exports?
  • How will they be enabled and trained?
  • What level of access do different users need for the system?

Flip the Switch

NMH worked with its consulting partner to come up with solutions that work with its technology, policies, process, and staff. And—big bonus!—the exercise has brought accounting and fundraising closer together. 

Sam and Aniyah smile as they shake hands in the NMH offices in front of the whiteboard of accounting terms.

Now it’s time to start up Accounting Subledger and start creating ledger entries.

But hold up—make sure you don’t rush anything. It’s important that you install, configure, and test everything in a sandbox org first. It's critical to configure Accounting Subledger exactly how you want it before enabling ledger entry creation. Remember that these records are permanent and can’t be deleted by conventional means.

After one last check in the sandbox and a deployment to production, NMH and its consulting partner are ready to go. In the next unit we’ll see how Accounting Subledger works silently in the background to help NMH’s fundraising and finance teams better communicate.

Resources

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