The Chart of Accounts is a great way to get a bird’s eye view of what’s going on in your company. Think of it like a snapshot that can determine the financial health of your organization at an exact moment in time.
Should you evaluate your Chart of Accounts?
Maybe you designed your Chart of Accounts at the start of your company, or perhaps you just started at a new organization and you are reviewing reports and processes. Whatever the case, your Chart of Accounts should suit your needs and be able to give you answers to specific questions. Taking the time to evaluate your Chart of Accounts is important and it will make your life easier when you have to provide financial reports.
Below are three key signs that it is time to redesign your Chart of Accounts:
- If Excel is your main reporting tool of choice, mainly because your financial system isn’t meeting your needs. Excel can lead to human errors, in fact, did you know that 88% of Excel documents have documented errors? That’s a huge percentage! Think of how often you use Excel and how easily it is for a mistake to happen. The wrong digit set in a formula or accidentally reversing a set of numbers - - - every time you open an Excel document the probability of errors increases and it is almost impossible to prevent.
- If you have difficulty when you get a request for a new or ad hoc report. For example: 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. This could be because your business has changed or you need different reporting parameters. When you, or someone in your organization, originally set up your Chart of Accounts you might not have known to include certain reporting factors. Your business is like a living, breathing, organism that changes over time and adapts to the market’s needs in order to survive. Your Chart of Accounts might have to account for those changes and adapt along with it.
Redesigning your Chart of Accounts to fit your current needs might be as easy as making a few simple changes, or perhaps it is a more in-depth process that requires a lot of thought and analysis on what you need. What is important is being able to get the right data, reports, and analysis so that you can accurately dictate your company’s financial health.
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