Account management is the backbone behind every organization's workflow. Ask any expert CPA, and they'll tell you the importance of keeping a clear record of all the organization's transactions.

As someone responsible for an organization's accounting records, you can be asked for any financial detail at any point in time. It wouldn't be wrong to expect your bosses to demand an old invoice or a long-forgotten event's expenditure details from you. Going through old records means a lot of hassle and paperwork that can be frustrating and time consuming.

Luckily, you can save yourself from this annoyance by organizing all financial details in an easily accessible way. Keeping a chart of accounts is probably the only way to keep your organization's money-related information safe and easy to access. The chart of accounts is a great tool that small businesses can use for sound financial bookkeeping.

Given below is an idea of what a chart of accounts is and why it’s important.

WHAT IS A CHART OF ACCOUNTS?

A chart of accounts is sometimes also referred to as COA. Simply defined, a chart of accounts is a full-fledged list of an organization's financial details. These financial details include earnings, expenditures, profit, equities, assets, and all other such money-related information about the organization.

All this information is sorted and well organized in a defined order in a COA. This sorting makes it easier to track the information you need quickly and without any hassle. For a business with more than one working account, the chart of accounts would include details from all the accounts separately.

COA allows anyone to quickly glance at an organization's financial status and lets them track down the information they need easily. Since everything is sorted in different (yet related) sets, there're lesser chances of losing any financial detail once you have entered it in the COA.

This is especially useful for a small business that doesn't have enough of a budget to seek out well-known accounting software services. If you are using accounting software, your organization's chart of accounts should automatically be generated by the application. You can make desired changes to the categories in your automated COA if you want to make it more refined and easier to read.

The kind of organization a chart of accounts is used for determines how it can be made. Your chart of accounts may or may not have categories present in other charts depending on your business's nature. Usually, an accountant with considerable knowledge of practical bookkeeping can design a COA for your business.

WHY ARE THE CHART OF ACCOUNTS IMPORTANT?

Other than just allowing you easy access to your specific financial details, a COA has other significant benefits for an organization. All these benefits make it extremely important for your business to have an updated chart of accounts, no matter how small it is.

Although a COA sometimes helps different organizations differently, here are some of its common uses for all businesses. We're sure that these points will urge you to start recording your finances in a COA if you don't have one yet.

1. A COA is probably the easiest way of recording your business's finances. It keeps details about your oldest to your newest transactions and lets you quickly access or discard an account when needed.
2. A COA frees you from a lot of paperwork and the need to remember the exact revenue coming in from different streams. It acts like a self-explanatory map of your business's finances that guides you to exactly where you want to be.
3. Because a COA has expenditures, profits, losses, and all other monetary elements sorted separately, it helps you get an idea of how your business is doing financially.
4. Just by looking at your COA, you can make better decisions about what you need to do in order to generate more income and except more losses.

CONCLUSION

Overall, you can look at COA as a replacement tool for all your boxes of receipts and bulky finance-related files. It organizes years’ worth of financial details on one sheet. It also sorts them into different accounts or compartments, so that you can quickly access whatever information you need.

If you need help setting up or re-doing your chart of accounts, please reach out to Josh Hall at Josh.Hall@HallAcctCo.com or Jeremy Hall at Jeremy.Hall@HallAcctCo.Com for more information. From tax filing strategies to tips on bookkeeping and accounting, we’ve got you covered.

FUTURE IMPORTANT DEADLINES

1/15/21
Estimated Quarterly Tax Payment for 2020 Tax Year Due
IRS Deadline for Quarterly Estimated Payments for 2020 (Form 1040-ES)