Optimize your chart of accounts

author Edgar de Wit

Many companies end up with complicated reporting spreadsheets, just because their Chart of Accounts is messy. Too many accounts, too few, inconsistent classification, bookings not properly coded etc. Trying to correct that in the month-end reporting is a nightmare.

Here are tips to help you improve your Chart of Accounts:

Focus on what is important

Don't create too many accounts. We often see cases with hundreds of accounts, where it is hard to see the wood from the trees. Closer inspection typically show lots of (near) duplications, inconsistencies, legacy coding etc. Each account has to have a clear and unique purpose, but at the same be a material item in your overal reporting requirements. Non-material items do not warrant a separate account.


Avoid mixed accounts

We see clients spending hours every month dissecting closing balances for reporting purposes. This is an indication that your Chart of Accounts is not optimal. Make sure every single account has a clear and unique purpose, and the classification of accounts is logical and consistent.

Ensure good classification

Think carefully about your reporting requirements, because they drive the classifications in your Chart of Accounts. Make sure that each account rolls up to the right aggregation, with no discrepancies or inconsistencies.

As an example, the below report simply follows the classification in the Chart of Accounts, without any special rules in the report:


Review your booking processes

Review your booking processes and coding rules to ensure they are clearly agreed and documented. Similar to poor Chart of Accounts, you should avoid having to correct inconsistent coding at month-end. It is simply not good use of your time, it is error-prone, and you will always be running behind the facts.

Fix problems at source

If you find coding issues in one month, fix them in the booking processes going forward, so that the problem does not keep repeating. Fix the problem at the source, not in your month-end processes. You would be amazed about how often people keep correcting the same type of things every month-end.

When to optimize

If you recognize the above problems, then we suggest you action as soon as possible. Your time is precious to keep working inefficiently.

Another appropriate time is the start of a new financial year. You can remove old accounts that you no longer use in your business, or duplicate accounts.

Finally, when moving to a new reporting system, you should always use the opportunity to review and optimize the Chart of Accounts.


If you keep these steps in mind, and rigorously implement them, you will greatly improve your reporting processes, and you will be able to produce your reports quicker and more reliably.

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