The benefit of a good chart of accounts
We love using the various accounting software that is on offer with the main ones that are clients use being – Xero, QuickBooks and FreeAgent – although we do use others also.
Software is great at helping with the automation of certain tasks which used to be very manual such as bank reconciliations and the entering of mountains of invoices.
It’s always worth remembering though that to get good information out of a system, you need to be putting good information in so getting it set up to work for you in the most effective way but also giving you the reporting that is useful to help you run your business is essential.
One the simplest and most fundamental places to start is getting your Chart of Accounts set up correctly. The chart of accounts is the foundation stone of your reporting so this may include the breakdown of income sources, how expenses should be analysed, the level of detail you want to go into with these items and the information from which you can get a snapshot of what the business is doing. Using this correctly also means that there is great synergy between the day-to-day reporting within your business and what you may see when it comes to your yearend accounts.
We’ve put together some tips that may help you with getting this set up:
- Consider what information is important to you and what you want to see as a snapshot – for example this could be breakdown of sales or analysis of expenses.
- Consider what may be important to you in achieving your business plans – we often see that people plan for today and then need to re-adjust things later. If you know you want to be heading in a certain direction plan for that scale now as will save you time and efforts later.
- Test the reporting – it’s no point going to the effort of getting this set up and then not use the information. All the software offers some great reporting options, so think about what you need, test it to make sure it gives you what you want and make it a habit that you use that information routinely.
- Be consistent – once you have gone to the effort of getting this set up be consistent with using it. If you are posting all over the place, the information won’t be great and will take some unpicking come a period end. Once you have your method, use the automation tools to help you remember.
- If you aren’t sure – ask! Your accountant will be experienced with how items need to be reported within a set of accounts. If you aren’t sure where to post something, ask. Posting items in the right place will ensure you get accurate reporting.
Better and more useful information within your business will help to support you in the decisions you are making and move you nearer to what you want to achieve.
If you need help with getting the most from your software or putting processes in place then get in touch with the team here at RiverView Portfolio.
