November 2020

The Chart of Accounts (ie. COA) is so important to have good financial reports and to have the specific data that you need to make good business decisions. 

For instance, if you have a COA, and you have only one account called Utilities, that may work for some businesses. But other businesses may want to know how much they spend on phone bills so they can ship around and reduce their bill. OR a different company may need to know how much their electric bill fluctuates from one season to another. 

A better example of this might be COGS (cost of goods sold) where a business may want to know how much they spent on one particular product than another so they can calculate their profit for a particular product. 

So let’s jump into a brief lesson on the COA! 

WHAT IT IS

In simple terms, your chart of accounts is the list of categories and subcategories used to organize, identify + track the money moving in and out of your business

WHY IT MATTERS

If the list is cluttered and full of duplicates and errors (or just simply doesn’t fit your business model), your reports will be confusing, incorrect, and unhelpful

If it’s clean and well-organized, it’ll help produce clear reports that will help you make strategic changes – like show you exactly where you’re overspending, or which of your revenue streams are the strongest

Do you understand what a Profit + Loss statement is, and why it’s SO important for your business?

We mean – REALLY understand? 

If not, here’s a quick rundown of why it matters, how to use it, and a helpful link if you want to read more about it. (which we encourage you to do!) 

First, let’s talk about WHY it is so important to create an accurate (and helpful) P+L report:

Up-to-date bookkeeping data in your financial software

Income and expenses correctly categorized  

Accurate separation between COGS and company expenses

Remember, your report will only be as good as the data you put in (garbage in, garbage out!) so make sure your data is right before you run the report.

Once you get it all right, here are the benefits of an accurate P+L. You may be : 

Craft accurate business strategies from real data, instead of just guessing at next steps

Set your business up for any financing and borrowing needs you may have in the future

Get you a crystal-clear view of your profit margin on the bottom line

See your expenses in detail – and easily figure out what you cut out to reduce your expenses