Properly managing beginning balances and retained earnings is crucial for maintaining the integrity and accuracy of your financial data. In Catalyst, these configurations help automate the process of rolling over balances from one fiscal year to the next, ensuring that each year builds upon the last without any gaps or errors. This tutorial will guide you through setting up Beginning Balance and Retained Earnings in Catalyst, explaining how they work and why they're essential. Whether you’re transitioning to a new fiscal year or ensuring that net income is properly mapped to your equity, this setup will help keep your financial records accurate and consistent year-over-year.
What is Beginning Balance?
The Beginning Balance setting allows you to automate the process of rolling forward your year-end balances into the next year. This is essential in accounting to ensure that your ending balances from one fiscal year seamlessly transition into the beginning balances for the next year’s Period 0 (P0). In Catalyst, this is called FY Beginning Balance. It's important to note that this balance will only be visible in the Catalyst UI and is not accessible as a selectable period in the cube pivot tables.
Why Set This Up?
This feature is important because when the year ends, the ending balances should ideally roll over into the next year as beginning balances. This keeps your financial records up to date and ensures consistency.
Setting Up Beginning Balance
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Navigate to the Configuration Page
Start by navigating to the System Configuration section:-
Go to Administration.
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Select System Configuration.
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Choose Financial Beginning Balance.
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How to Enable Beginning Balance
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On the Beginning Balance tab, check the box labeled Enable Automatic Beginning Balance/Retained Earnings.
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Then, select the Beginning Balance Starting Year.
Example: If you select 2024, the system will use the ending balances from 2024 and populate them as beginning balances for 2025. Similarly, if you select 2023, the system will use the ending balances from 2023 as the beginning balances for 2024, and so on. This ensures that the balances carry over correctly from one year to the next based on the selected year.
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Why Not Set it to "All Years"?
The configuration for beginning balances was previously handled using Financial Overrides in Catalyst, or even through integration jobs. This approach ensures only recent years are rolled forward based on your current setup. For historical setups, consult with your EBM support team to determine if you should enable this configuration and how to manage past years.
Example: Why Enabling Beginning Balances is Critical
Scenario: Transitioning to a New Fiscal Year
When ABC Manufacturing closes 2024, they roll over the ending balances—like Cash, Accounts Receivable, and Inventory—to the beginning balances for 2025. This continuity ensures that as new financial activity is added in 2025, it’s based on accurate starting points. Without this, you’d be working from inaccurate or zero balances, causing errors to compound over time.
What is Retained Earnings?
Retained earnings reflect the accumulated net income that has been reinvested into the company rather than distributed as dividends. Each year, the net income from the previous year is moved to the retained earnings account in the equity section of the balance sheet.
Setting Up Retained Earnings
Automatic Retained Earnings Management
In the past, mapping retained earnings was done through custom integrations or manual overrides. However, Catalyst now supports basic functionality for auto-managing these mappings directly within the system. If your instance still uses custom logic, you may not be able to edit this page, as it will be greyed out.
Setting It Up
This setup often requires collaboration with your EBM representative to create dedicated retained earnings accounts for each company before you can map them correctly.
Steps to Configure Retained Earnings
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On the Retained Earnings tab, click Apply to expand the bottom half of the page, where you will find Excel Options for exporting an upload template.
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Export the template and populate the fields in the columns:
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Company
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Source Account
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Source Dimension 1 and 2
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Rollup Account
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Rollup Dimension 1 and 2
These dimensions are unique to your instance. For example, Dimension 1 could be Location, and Dimension 2 could be Cost Center.
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Uploading the Template
Once you have populated the template, return to the Catalyst page and use Excel Options > Upload to upload the file with the correct mappings. -
Mapping Example
Let’s say for Company ABC, you want the Net Income from the Location and Cost Center dimensions to roll into Retained Earnings on the balance sheet. Select the relevant filters and click Apply to set this mapping. -
Editing Mappings
After applying the filters, you can edit the mappings as needed. Once set up, Catalyst will automatically roll the retained earnings based on these configurations.
Example: Why Rolling Net Income into Retained Earnings is Critical
Scenario: XYZ Corp’s Year-End Financials
At year-end, XYZ Corp needs to transfer net income from the Income Statement to the Retained Earnings account in the Balance Sheet. By enabling the Retained Earnings mapping in Catalyst, XYZ Corp automates this process, ensuring that the transfer is done accurately and consistently each year without the need for manual intervention. This is critical for maintaining accurate equity balances and ensuring compliance with financial reporting standards.
This setup ensures that your financial data is accurately mapped and updated for the new fiscal year, saving you time and minimizing errors. If you need further assistance, feel free to reach out to the EBM support team for guidance specific to your instance.
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