This article is a guide to Nominal Maintenance within Insight.
What are Nominal Ledgers?
- Nominal Ledgers are used by each firm to manage the finances of the business. While the accounts of your Clients are run through the matter ledgers, the accounts of your practice are run through the Nominals.
- Nominal ledgers are grouped into areas, known as nominal ranges. This is done so that similar areas of income and expenditure are grouped for reporting purposes.
- This guide shows you how to set up nominal ranges, set up nominal ledgers, modify details, and set budgets.
Why are Nominal Ledgers Important?
- In Solicitors’ accounts, the finances of the business and the finances of the Clients are kept separately.
- There are areas of overlap, such as disbursements which are paid from your funds on behalf of the client and times when your clients pay you money to cover your costs, but it is important to keep separate ledgers so that you can run your business effectively.
- Nominal ledgers enable you to record your income and expenditure, which in turn means that you can assess your business performance and profitability.
Where Are the Ledgers Set up?
- Nominal Ranges are set up from the System Menu and within the Settings section. Nominal.
- Accounts are set up from the Accounts Menu and within the Nominal section.
Please see the article on Adding a Nominal Range. |
Nominal Accounts
Once your Nominal Ranges are set correctly, you will need to set up your individual Nominal Accounts. Setting up Nominal Accounts creates the ledgers that you post to when dealing with your business income and expenditure.
If you are a new practice, it is wise to seek advice from your accountant before setting up your nominals. This will ensure that your accounts are configured in a way that is easy for them to understand and work with, potentially saving you extra cost or extra work when your accounts are audited.
To Add a Nominal Account
- From the Accounts menu, select Nominal Ledger from the Nominal section. This is the last icon on the menu bar.
- Click Add from the menu at the top of your screen.
- Enter a reference for your new nominal account. The reference can be used to search for the relevant nominal account when posting or reporting.
- The reference you choose is up to you and can be made up of alpha or numeric characters (or a combination of both). In your reports, the nominal accounts are sorted and displayed first by nominal range and then by reference, so if you want them to display in a particular order you should bear that in mind here.
- Select which branch this nominal account belongs to. If you are a single branch firm, this field will already be filled in for you.
- Enter a description for this nominal account. The description should explain the type of income or expenditure items that will be posted to this account. Examples of a nominal description would be Stationery, Staff Salaries or Accountancy Fees.
- From the dropdown list, select the nominal range in which this nominal account belongs. For example, Stationery could be allocated to the office expenses range, Staff Salaries could be allocated to the staff expenses range and Accountancy Fees could be allocated to the finance range. You should be guided by your Accountant’s advice here if you are not sure how your accounts are best structured.
- If the nominal account you are setting up relates only to one department, you can allocate the nominal to the correct department by using the dropdown list. If income of expenditure posted to this account can relate to any department then you should not select anything from the dropdown list of departments.
- If you do select a department here, it will enable you to run your reports by department and analyse the performance of your business by department as well as overall. However, it is not compulsory to do this and the field can be left blank.
- Select a default bank for the nominal account by selecting from the dropdown list. It is not compulsory to do this, but if you always use the same office bank account for your postings, it is recommended as it will save you having to select a bank account each time you post.
- If the nominal account you are setting up is to be used for your next financial year, you can select that financial year from the dropdown list. If you do not select anything from this list, the nominal account will be active immediately.
- Use the VAT Liable check box to indicate if any of the postings to this account will be subject to VAT. Checking this box doesn’t mean that all postings to this account have to have VAT on them, it simply means that you will be presented with the VAT fields to fill in when you do a posting.
- If you do not mark the nominal account as being VAT liable, no VAT boxes will appear when you post. Examples of nominals which are not liable to VAT would be Salaries, PAYE/National Insurance and Drawings.
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Below is an example of what a completed screen may look like:
- Once all the relevant fields are completed, use the Save button in the top left corner of the screen to save your new nominal account.
To Add Budgets to a Nominal Account
- With your saved nominal account on screen, go to the Budgets tab at the bottom of the page.
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The budgets screen will be empty at first. Go up to the very top left of the screen and click on the Add button under the Budgets section of the menu. The icon looks like this:
- You will then see 12 boxes appear, numbered 1 to 12.
- Enter your budget for each month in the relevant box, then click the save button at the top of the screen when you’ve finished. Budget variances can then be reported on.
Suggested Nominal Accounts
- Your system does not come with a pre-defined set of accounts because we feel it is important that you have only those accounts which you need and which your accountant is happy to work with.
- In addition to your own ideas, we have suggested below some nominal accounts that you may find useful, as well as some which are essential.
Costs
- There must be a costs nominal set up for each of your departments. This happens automatically when you set up Departments by going to System menu, then Settings and choose Departments from the left-hand menu.
- When you add a new department a new ‘Billed Costs’ nominal will automatically be set up in the Nominal Ledger. This will come in to use each time you post a bill of costs and allows you to monitor performance and profitability.
- The range for these nominals should be Billed Costs and you must ensure that every department has a costs nominal.
Petty Cash
- Petty Cash is dealt with like a bank account and therefore any transactions are posted to the relevant nominal account (e.g. stationery) that the petty cash has been spent on, rather than a separate petty cash nominal.
- You do need to use a nominal account when you are posting any withdrawals from your bank account to top up the petty cash tin. You may therefore find it useful to set up a separate nominal as a transfer control account.
- This nominal should not be set to be VAT liable. The nominal account will retain a zero balance as all transactions on the ledger will show the same amount of money coming in and going out, but behind the ledger, the money is being moved between the bank accounts.
Credit Card
- Spending money on a credit card means that you have purchased items but the effect of those on your office bank account is not immediate. This is not the same as spending with a debit card, which should be treated in the same way as dealing with cheques and direct payments.
- If you use a credit card for purchases, you should set up an office bank account in the system and name it ‘credit card’. When you post your expenditure to the relevant nominal, you should select the credit card as your bank account.
- When you pay off your credit card, either in whole or in part, you need to transfer money from your office bank account to your credit card account. For these postings, you will need a nominal account.
- This nominal should not be set to be VAT liable. In the same way as dealing with petty cash transactions, the nominal account will retain a zero balance as all transactions on the ledger will show the same amount of money coming in and going out, but behind the ledger, the money is being moved between the bank accounts.