Managing your business with small and useful changes – Chart of Accounts

A lot of people dream about a successful business. They work very hard to make it successful. Remember doing business is taking a lot of responsibilities. Every business owner has to manage some of the very basic and similar duties which can be summarized as follows:

1.   Sales and Marketing

2.   Human Capital Management

3.   Accounting and Finance

4.   Government Reporting

5.   Products and Services

6.   Operations and Administration

When a business is new, most of these activities are controlled and managed by the owner or with the help of very few employees. Once the business starts growing, these functions need more specific attention. The larger business organizations split many of these functions separately such as Sales, Marketing, Human Resources, Payroll, Accounting, Finance, Reporting, Management Reporting, Analytics, Taxes, Products, Client Relationship Management, Contract Negotiations, Operations, Administration and much more. However, the core functions remain same. Once the business grows, it is vital to find and keep the employees with specialized skills.

The biggest challenge for the business owners is a time frame when they start the business, and time it starts growing. Today I am going to talk about essential function i.e. accounting and finance. Accounting and Finance are the areas where most of the start-up business owners think they know what they are doing.  Let us see how a good accounting system affects all the business functions. The first and foremost important step for this to work and perform at the highest level is a <strong>CHART OF ACCOUNTS.</strong>

A good chart of accounts is a very useful management tool for many business functions and better decision making. What is a chart of accounts? In a business world, a chart of accounts present nature of the business, a direction of business and activities of business through a combination of revenue and expenses. These events can be booked for twelve months or spread over a period of more than 12 months. Some of the critical factors to consider before creating an effective chart of accounts are

1.     What kind of products or services your business provides?

2.    How many goods and services you have and how do you want to group them?

3.    What is a right size of the chart of accounts?

4.    What demographic area are you going to spread

5.    What are the future business plans

6.    Who is handling the accounting function

7.    How trained is the staff handling the accounting function

8.    What kind of reports you are expecting

9.    Whether the reports provide financial, operational and performance analysis

10. What are the Key Performance Indicators of the business

Each question mentioned above provides a vital source of well-arranged information to the management for better decision making, positioning the company for better growth and allowing them an insight when to add more resources to sustain the growing business. However, most of the start-ups ignore this essential function. The chart of accounts of these firms does not take into consideration many questions as mentioned above. By the time they realize the need to analyze the information they have accumulated many years of data in a less useful chart of accounts.

A well designed and useful chart of accounts helps a business in all the functions from sales, marketing, accounting, analysis, administration, operations and much more. Nature of the firm and reporting determine the size of the chart of accounts. Our firm Analytix BizMgmt LLC provides support to all business by evaluating and designing a robust chart of accounts as per your company needs. It, in turn, helps you to take advantage of many benefits associated with it whether it is an analysis for decision making or planning for growth of the business. Drop us an email at <a href=”http://mailto:info@abm-llc.com/” target=”_blank” rel=”nofollow noopener”>info@abm-llc.com</a>or visit our website at www.abm-llc.com to reach to us to know more about this.