Sometimes the answer is a simple refresh to the chart of accounts and other times it might mean a more robust change to the way you process transactions.

The chart of accounts is the foundation of your financial reports. Having the right account type and then organizing and grouping those accounts can create depth into your reports to optimize decision making. In addition, when choosing the accounts you want to keep compliance in mind.

While there are some accounts that are normal across industries, there may be others that are custom to your business or the basis of accounting that you use.

Accounting software such as QuickBooks offers a template of accounts based on your industry; however, this list is in no way complete.

A non-profit organization may have accounts for restricted and unrestricted contributions, membership dues, other income – which may be subject to unrelated business tax and pledges receivable.  This type of account setup will create ease for the preparation of a non-profit’s 990 or annual audit.

Whereas a government contractors’ chart of accounts will include grouping of accounts for direct, indirect costs and unallowable costs. This approach will allow for transparency if the business is subject to a DCAA Audit or needs to calculate indirect rates for contracts.

Moreover, a product manufacturing business would require accounts for inventory, cost of goods sold and possibly research and development and patents.

Another way to maximize financial reporting is to make changes to the processing of transactions by using classifications and customer tracking.

Under QuickBooks online plus subscription you can classify your transactions to monitor the individual profitability of a business segment, product, contract, or grant depending on your information needs. The basic requirement to enable these features in QuickBooks is first to create a list of classifications and customers, then tag each transaction as appropriate to a class and customer.

However, before getting started there are several questions to ask such as: what is important to track and requires reporting. Does the business have compliance requirements related to a grant? Does management want to review the profitability of a product to make decisions on the changes in sales price or costs? Asking these important questions will put you one step closer to determining the best structure and processes for your transactions.

If you are a non-profit the class feature allows you to breakdown your organization by Program, G&A and Fundraising to create ease in the preparation of the end of year functional expense breakdown for the 990 and audited financial statements.

A for-profit business looking to monitor customer profitability can create customer tracking reports by adding a customer for all applicable related transactions.

The experts on our Client Accounting and Advisory team are experienced in walking our clients through the process of re-vamping their accounts and processes to create reporting to best suit their needs. We understand the importance of organizing, sorting and tracking financial data to give your books the facelift it needs

By: Sabeen Taha