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4 strategies to help tribes track expenses during COVID-19

Apr 08, 2020

Legislation continues to come out of Washington with the latest in stimulus to aid businesses during the severe economic disruption caused by COVID-19. Each day brings greater clarity on legislation but also new challenges on how to tackle the news.

One thing is clear in all this: Tracking your expenses specifically related to COVID-19 will be critical.

Organizations may need this information to apply for SBA loans and traditional interim financing, to claim potential insurance monies and tax credits or to apply for local grants. Ownership/leadership may also be interested in understanding how this pandemic has impacted the organization financially. Are you prepared to provide that data?

Tracking your expenses in these times is key — but what is the best strategy?

It’s likely that nonprofits, tribal governments and tribal entities will need to segregate COVID-19 loses or expenses on their external financial statements to demonstrate need for certain funding and claim payroll tax credits properly. Some expenses being incurred right now may fall outside the definition of operating expenses and need to be separately disclosed in financial statements.

In Wipfli’s tribal community of practice, we primarily implement Sage Intacct. But regardless of the system you use, there is always more than one way to do things. Your chosen methodology will depend on your reporting needs.

Strategy 1: Add a general ledger account

Add a general ledger account

Accountants and bookkeepers can simply add a new general ledger account, perhaps named “COVID-19 Expenses” and begin tracking. The above example allows for simple tracking of the expenses, which can be tagged to any other existing dimension utilized in your configuration. This example shows how this account can be applied to track the expenses by department and in total.

Pros of this strategy:
  • Simple, one-step configuration
  • Can be used across any existing dimension (such as departments)
  • Easily identifiable for users to properly code items
Cons of this strategy:
  • Departmental reporting versus budgets may show over-expenditures
  • Does not segregate types of COVID-19 expenses incurred

Strategy 2: Add many general ledger accounts

Multiple general ledger accounts

This second strategy expands upon the first. Adding general ledger accounts that mirror existing ones has the benefit of allowing a greater level of detail — answering both “what” and “why” of the particular expense. This more granular reporting maybe be necessary to demonstrate which amounts were expended for payroll only, for example.

Pros of this strategy:
  • Segregates types of COVID-19 expenses incurred
  • Can be used across any existing dimensions (such as departments)
  • Easily identifiable for users to properly code items
Cons of this strategy:
  • Departmental reporting versus budgets may show over-expenditures
  • May greatly expand the number of accounts in your system, causing clutter

Strategy 3: Create a new department

New department added

A third option for tracking these new expenses is to simply create a new department (or class, fund or whatever tracking capabilities exist in your system). This method segregates these expenses from their normal department, protecting department or project managers’ budgets.

Pros of this strategy:
  • Simple, one-step configuration
  • Expenses can be tracked against existing general ledger accounts
  • Protects departmental reporting from being skewed by unusual operations
Cons of this strategy:
  • Unable to track expenses back to department level
  • Consolidated department reports may include COVID-19 without being able to easily separate it

Strategy 4: Create new account(s) and new department

New  accounts and new department

The final method highlighted combines #1 and #3. This approach provides two layers of separation from “normal” expenses, which may be an advantage.

Pros of this strategy:
  • Protects departmental reporting from being skewed by unusual operations
  • Easier to use when the nature of expenses applies to many departments or no particular department
  • Reporting systems can easily separate by one or both layers of separation for varying purposes
Cons of this strategy:
  • Unable to track expenses back to department level
  • May greatly expand the number of accounts in your system, causing clutter

If you need help to track expenses

Whether you are using an advanced financial management system like Sage Intacct or a bookkeeping system like QuickBooks, you can implement a strategy like the four described above. It’s important to ensure that you consider the needs of the users of the financial statements as well as the requirements of any stimulus that your organization can take advantage of.

If you need help preparing for this component of the COVID-19 interruption, we will work solely on providing expense management advice, or we can take you through the entire process of ensuring your financial reporting and supporting documentation is in order.

Reach out to your advisers at Wipfli if you have questions about which requirements are most relevant to your organization or if we can assist in any way.

Make sure to visit our COVID-19 resource center for further help navigating this crisis.

Author(s)

Jason Winkler
Senior Manager, Business Development and Solution Marketing
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Nik K. Wong, CPA, CFE
Senior Manager
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