If you’re a QBO user, please do me a favor…stop what you’re doing right now and pull up your company’s Chart of Accounts. It’s OK, I’ll wait.
Does any of this look familiar?
• Office Expense
• Office Expenses
• Office Supplies
• Office Suplies
• Office Epense
When we review a customer’s chart of accounts for the first time, we see account names like that…five accounts in the Chart of Accounts that really should be one account. Not only does this make the Chart of Accounts messy, but you lose the ability to compare the accounts from year to year, and you also create a useless set of financials.
Your Chart of Accounts should do the following for you:
1. Provide the owner and other key stakeholders with a concise set of financial statements that easily show revenues and expenses specific to various services or products;
2. Provide key employees with “line of sight” feedback about their performance;
3. Provide indicators of progress towards goals.
I can almost guarantee you that if you haven’t reviewed your Chart of Accounts recently, you aren’t getting everything out of your financial statements that you should be. Think of useless accounts on your P&L and Balance Sheet as static…they interfere with your ability to easily understand what’s being reported and they pull your eye (and your brain) away from the important things. Every time you have to stop and think “What is included in this account” is wasted time and wasted energy that you should be using to assess your company’s performance.
In our Grow-Up Consulting engagements, we include a review of the Chart of Accounts at the very beginning of the engagement. After all, we can’t help assess a company’s plan to scale or change direction if the financials aren’t useful. Another component of what we do with our Grow-Up Consulting customers is the building of useful company performance dashboards, but you can’t do that without useful financials; and we have already said that if the Chart of Accounts is garbage, the financial statements aren’t useful. The Chart of Accounts is where we start.
If your business is growing and you want to build new goals for its future, our Grow-Up Consulting engagement could be a step in a new and exciting direction.