What is your financial strategy? If you have to think for more than a couple of seconds before answering that question, you might not have one. That's okay — plenty of us could use some help with our finances. While it can be tempting to run from information about money when you're struggling to get your act together financially, you're better off just digging in and starting to read. This website is a great starting point. Here, we share informative blog posts about all sorts of financial topics. Learn about budgeting, saving, applying for a credit card, spending responsibly, and so forth. Before long, you will have a financial plan — and a good one, at that!
One of the most important parts of your small business's bookkeeping is its chart of accounts. The chart of accounts is the list of categories into which all transactions — money coming in, going out, and changing purposes — are sorted. How can you make yours effective, easy to use, and long-lasting? Here are three key goals to make.
1. Consistency
One of the most important keys to a useful chart of accounts is consistent use. If you categorize the same expense into different accounts each time it crosses your desk, you'll never be able to compare costs, do research about spending, or create accurate financial statements.
Consistency is hard to achieve at first. You may want to keep a set of notes about which accounts you use for recurring expenses or income. This is particularly important if more than one person assigns categories in the software. In addition, researching where prior expenses were categorized will help you develop consistent usage.
2. Simplicity
Most bookkeeping software comes with a standard chart of accounts for your type of business. But even this may be more complex than you actually need. Having too many accounts available increases the likelihood that transactions won't be consistently labeled each time they happen. It also wastes time and energy since you have to wade through unnecessary categories.
Make a point to go through your chart of accounts at least annually. Look for accounts that are never used or that haven't had any transactions in many months. Remove empty accounts and close or block disused accounts until the end of your financial year, if possible.
3. Customization
Finally, remember that you can adjust your chart of accounts at any time for any reason. You don't want to change things randomly, of course. That would make the chart of accounts even less effective than before. But adjusting it is a good tool to achieve targeted goals.
Perhaps, for example, you want to know which of your two main divisions earns the most. You might break down the income category into 'Income, Division A' and 'Income, Division B'. Now the chart of accounts does the work for you, tracking earnings and providing useful and simple reports.
Where to Start
Could your chart of accounts work better for your business? Could it provide more useful information, track your money better, or be easier to use? If so, start by meeting with a business bookkeeping service today. They will help you hone your current chart of accounts or set up one that will serve your business well.
Contact a company like DornerLand Bookkeeping, LLC for more information.
Share25 October 2022
