Sage Intacct for Schools: Save Time with Inter-Entity Automation

Are you spending too much time manually consolidating your schools' financial statements, booking intercompany entries, or reconciling inter-entity transactions? Would you rather click a button (literally) and see your consolidated financials just appear before your very eyes?

Wouldn’t it be great if your team could focus more time analyzing financial data and providing value-added services instead of painstakingly preparing the financial statements? If you answered yes to any of these questions, then keep reading to learn how Sage Intacct can save you time by automating your inter-entity transactions.

You can leverage Sage Intacct’s automated inter-entity mapping to improve efficiency and eliminate manual, error-prone processes when one school pays or receives money associated with a different school. When I worked in a K-12 school district, my team had trouble finding time to do the value-added work (the fun stuff!). Instead, it took most of their effort to prepare the financial reports needed for board members, the government, and various stakeholders. I love in my current job, working with schools to streamline financial processes and reporting using Sage Intacct. This automation frees up the business office to spend more time on value-added work.

Sage Intacct terminology for schools

Sage Intacct refers to inter-entity transactions as the automated balancing transactions generated when schools pay or receive money associated with a different school. You may call them intercompany transactions or Due To/Due From transactions.

However you refer to them at your school, Sage Intacct can help. In Sage Intacct, the automated inter-entity mapping works between whatever you define as your entities. In this blog, I have assumed the schools are set up as entities, a common configuration. You could also set up entities as funds if your school follows traditional fund accounting practices.

When I started working in a school district using traditional fund accounting, the software I used did not have automated inter-entity transactions. I can’t tell you how many times I tried to post a journal entry those first few months without the balancing transactions. Luckily, I received an error message, or I would have had a big reconciliation mess on my hands.

With Sage Intacct, once the inter-entity mapping is configured, you don’t even need to think about these balancing entries because they happen automatically. If you have transactions in one school’s bank account on behalf of another school, Sage Intacct will automatically book the Inter-entity Receivable (Due From) and Inter-entity Payable (Due To).

With Sage Intacct, the multi-entity structure and the inter-entity mapping can be easily customized to reflect how your organization handles inter-entity transactions. There’s flexibility to choose which general ledger accounts you use for the automated inter-entity transactions. The flexibility to easily customize Sage Intacct to your organization’s needs is one of the software’s greatest strengths. Let’s explore three ways you can configure your school’s inter-entity mapping.

Scenario 1: One Inter-entity Receivable account and one Inter-entity Payable account for each school (entity)

If you need the most granularity, each school can have its own Inter-entity Receivable and Inter-entity Payable general ledger account to easily identify who owes who what. On your financial reports, you can leverage account groups to combine the Inter-entity Receivables and Payables together on a consolidated basis. You also have the option of booking journal entries to net out the Inter-entity Receivables or Payables in your main financial accounting book, or in a separate user defined book. Curious about how user defined books work? Check out this blog on Sage Intacct’s Multi-Book Architecture.

Scenario 2: One Inter-entity account used as both the Inter-entity Receivable and Inter-entity Payable for each school (entity)

If you don’t need quite so much detail, you can configure the mapping so each school has one account used for both the Inter-entity Receivable and Inter-entity Payable transactions. This approach works nicely if you need to transfer cash from one school to another due to the automatic elimination effect of using the same account for both the Inter-entity Receivable and Inter-entity Payable.

Scenario 3: One Inter-entity account for all schools’ Inter-entity Receivables and Payables accounts

A third common configuration is for every school to use the same general ledger account for all their inter-entity mappings. In this case, schools can choose an asset, a liability, or even a cash account, if your schools share a bank account and you need to see cash broken out by school. When you use this one account approach, you can leverage automatic eliminations. You can easily run your financial statements for an individual school or multiple schools and the Inter-entity Receivables and Payables will automatically net out without any additional reporting adjustments required.

How Inter-Entity mapping works in Sage Intacct

While Intacct has a basic inter-entity mapping option, these examples use advanced mapping, as it allows four separate accounts for inter-entity mappings between each pair of entities. Below is an example of the Inter-entity account mapping setup. This may look a little confusing at first, so I’ll explain how to read this chart.

• Red section
  • Defines School 1 as Entity A and School 2 as Entity B.
• Green section
  • Defines the Inter-entity Receivable (IER) and Inter-entity Payable (IEP) accounts that will be used on Entity A (School 1) financial statements. For example, if School 1 (Entity A) has an Inter-entity Receivable (IER) from School 2 (Entity B) of $100, then on School 1’s books there will be a debit balance of $100 in account 1320. Likewise, if School 1 (Entity A) has an Inter-entity Payable (IEP) of $100 owed to School 2, School 1 will have a credit of $100 in account 2320.
• Yellow section
  • Defines the Inter-entity Receivable (IER) and Inter-entity Payable (IEP) accounts that will be used on Entity B (School 2) financial statements.

Now, let’s explore these three different configuration options in more detail.

Scenario 1 example: One Inter-entity Receivable account and one Inter-entity Payable account for each school (entity)

Using the mapping chart from the previous section, assume School 1 paid an expense on behalf of School 2 for $3,500. When the check is posted, the following entry will automatically populate on the transaction. The school column tells you which school’s financial statements the entry is associated with. In this example, School 2 has a credit of $3,500 in account 2310 and School 1 has a debit of $3,500 in account 1320.

Let’s say School 2 also pays an expense on behalf of School 1 for $6,000. The subsection of my Balance Sheet/Statement of Financial Position after both transactions are posted is shown below.

When you reconcile your accounts, you may want to see each school’s inter-entity balance broken out on each row, however, when you present your financials to the board, you may need to consolidate. You can easily click the triangles next to the header to consolidate all school inter-entity accounts into a summary line, so you just see Total Inter-entity Receivables or Total Inter-entity Payables.

You may be thinking, that looks great for School 1 and School 2, but when I show my consolidated financials to the board, I don’t want to show the board $9,500 as a Receivable and a Payable. Showing the “All Schools” column with consolidated inter-entity transactions is an easy step in the financial report writer. I quickly created an account group called Inter-entity Transactions that includes both Inter-entity Receivables and Inter-entity Payables. I collapsed the detail and now my consolidated financial statement is shown below.

Looking for more information on how to build account groups and create reports? Check out this blog on Building Financial Reports in Sage Intacct.

Scenario 2 example: One Inter-entity account used as both the Inter-Entity Receivable and Inter-Entity Payable for each school (entity)

In terms of granularity, the middle option is creating one general ledger account for Inter-entity Receivables and Inter-entity Payables per school. In this example, School 6 (Entity A) uses account 1340 for Inter-entity Receivables and Inter-entity Payables, and School 7 uses account 1330. This account can be set up as either an Asset or Liability.

A $2,000 payment from the bank account assigned to School 7 (Entity B) on behalf of School 6 (Entity A) generates the following inter-entity transactions.

If School 6 turns around and pays $3,000 on behalf of School 7, the $3,000 automated inter-entity mapping will net against the $2,000 entry resulting in the following balances.

In this configuration, you may have a balance not following the natural sign of the account, such as a negative receivable or a positive payable. One recommendation is to think about the typical flow between schools when deciding if the account should be an asset or a liability. If you typically expect School 7 to owe School 6, you may want to use a liability account in the inter-entity mapping.

One advantage to this configuration is in the “All Schools” column, the inter-entity balances automatically eliminate. This configuration can also be useful when you transfer cash from one school's bank account to another school's bank account to settle the inter-entity balances due to the automatic elimination.

Scenario 3 example: One Inter-entity account for all schools’ Inter-entity Receivables and Payables accounts

Do your schools all share one bank account but you want to see how much cash each school contributed to the total cash balance? Schools 3, 4, and 5 share a bank account instead of traditional Inter-entity Receivable or Inter-entity Payable accounts. In this case, you can use a Cash Allocation account for all inter-entity mapping pairings.

Then create a Cash Allocation account with all the Cash accounts in one account group called Total Cash. This allows you to easily see the cash balance associated with each school on the Statement of Financial Position/Balance Sheet.

With the click of a button, you can consolidate Total Cash as shown below.

If your schools don’t share a bank account, but you want to take advantage of the automatic elimination benefits shown above, you can use a single asset or liability account in the inter-entity mapping table instead of a cash account.

How CLA can help schools use Sage Intacct

When deciding how to configure your inter-entity mapping in Sage Intacct, consider several factors including reporting requirements, the direction inter-entity transactions flow between schools, the volume of transactions, and how inter-entity transactions are settled between schools. Keep in mind you will want to capture detail at the most granular level needed and then create your financial reports with summary data at the appropriate level for your different stakeholders.

Sage Intacct can save a lot of time by eliminating manual, error-prone inter-entity processes. The best part is once the inter-entity mapping is configured, you don’t need to think about it, which saves you time and frees you up to focus on your value-added work.

Interested in learning more about Sage Intacct for schools? Reach out to us.

You can also check out our Sage Intacct Webinar Series and blogs below:

• 2024 Sage Intacct Webinar Series
• Sage Intacct blog
• Sage Intacct for Schools: Data-Driven Decisions with Dashboards