How long would it take you to determine how much money your company has, how much it owes, and how much is going in and out of different departments? If even the thought of tracking down those details gives you a headache, it’s time to clean up your chart of accounts.
Chart of accounts 101
The chart of accounts is a list of all the accounts in your general ledger, including assets, liabilities, expenses, equity, and revenue. It’s where you record all your transactions.
Although the chart of accounts is supposed to be simple and organized, with a logical structure that makes it easy to find the financial records you need, over time the chart of accounts can become something of a sprawling mess. That’s especially true for growing businesses.
Benefits of a better chart of accounts
Cleaning up your chart of accounts will take some time and effort, but it’s worth it. With a cleaned-up chart of accounts, your accounting team can quickly get answers to questions about old invoices or tax-deductible items that might otherwise require hours of research.
Likewise, your auditor can get the reports they need, without interrupting your staff’s regular work. And you can rest easy all year long, knowing that your chart of accounts is up-to-date and accurate.
To clean up your chart of accounts, first identify all the accounts with a zero balance. They’re likely unnecessary and can be deleted, which is a good first step toward reducing the number of accounts you’re managing.
You’ll also need to audit all your account names to make sure they’re still accurate, and you should link parent and sub accounts, which will further tighten the organization of your chart of accounts.
But here’s the best way to clean up your chart of accounts: Invest in advanced accounting software like Sage Intacct that does a lot of the work for you. With Sage Intacct, you can automate all your invoices and payments. You can also greatly simplify your chart of accounts with the innovative dimensions feature that allows you to set up only your primary account codes.
Insero & Co. is a public accounting firm with decades of experience working with both nonprofits and businesses of all sizes. From audit assistance to business consulting, our experts can help you find smart ways to modernize your accounting processes to be more efficient and productive.