Earlier this week we gave a webinar on 5 best practices on designing (or redesigning) your Chart of Accounts. We addressed common questions you should be asking yourself, best practices for redesigning (or designing) your Chart of Accounts, and helpful advice from our in-house expert Mickey Stayman. During our webinar, we had a few great questions from our audience that deserve to be mentioned.
What indicators would I see to know my Chart of Accounts isn’t working for my organization?
Common indicators would be:
- If Excel is your reporting tool of choice mainly because your financial system isn’t meeting your needs.
- If you have difficulty when you get a request for a new or ad hoc report. An example would be: if senior management requests a report and you are really struggling to gather that information. It might be because the data isn’t available or your system isn’t designed to get the report information flexibly. You might consider that the Chart of Accounts is the source of this.
- If you are not generating certain reports because the data is not there to support them.
My organization is preparing to go public, do we need to account for that in our Chart of Accounts?
Going public is a big step and there are a lot of things to consider. However, from a reporting standpoint, I would say that the first thing I would look at are the SEC reporting requirements. You’ll need to know what additional information or data you will need to capture in order to satisfy the SEC. The second thing I would consider is discussing with the auditors what additional information they may require. There are different requirements for public companies. Do it early in the process so that you know what data you need to start capturing. I’m sure part of the IPO process will require this step. The third thing I would consider is what additional analysis your investor relations team may desire. For example: are there items that they would want to understand that would assist on their calls and possibly answer questions that might come their way? Looking at these factors is a good starting point.
How does industry factor into designing a Chart of Accounts?
The industry always factors into the Chart of Accounts. Often, we find that industries have their own set of unique standard metrics. For example: if you are in the healthcare industry, then per patient day statistics are standard. Knowing what metrics you need in your industry is valuable. Next, we find that many industries benefit from industry association reporting so that they can see how they are performing against their peers. The last thing is looking at regulatory reporting requirements in your industry.
It’s important to follow best practices when looking at your Chart of Accounts. To learn more about what they are and what 3 things you can do today to improve your Chart of Accounts, click here to view our webinar.