THE 5 SIGNS YOUR CHART OF ACCOUNT MAY BE OUT OF CONTROL!

 

Why should a simple thing like our Chart of Accounts (COA)  be the subject of any in depth discussion.  Here’s why:

  • Your COA is the foundation on which all financial reporting, planning and analysis will be based
  • A ‘thin’ COA reduces key entry errors and correcting Journal Entries
  • The larger the COA the more difficult future consolidations will become

As a member of The Institute of Finance & Management Controller’s Section, I found there are published articles regarding the impact of ‘messy’ COA’s on financial reporting.  But to address the question this article poses, here are the ‘five reasons your Chart of Accounts may be out of control’ and why’:

  1. Anyone can create a new General Ledger account
  2. Anyone can change a General Ledger account
  3. Numerous acquisitions of companies with their own COA’s.
  4. Entities created within your company with the same G/L Account title but different G/L Account number
  5. Too many manual journal entries & post-closing entries

One of the most difficult and challenging aspects to cleaning up a Chart of Accounts is prior year histories.  What will happen to them?  Does your software provide a way  to map G/L accounts to a consolidated financial statement?  Where do you begin?  Here are a few ‘suggestions’ to consider:

  • Stop the bleeding!  Restrict access to the creation of G/L Accounts to only a few people within the Finance/Accounting Department.
  • Restrict access to entering Manual Journal Entries to only a few people within the Finance/Accounting Department.
  • Involve your software vendor for your accounting system and have them assist you in developing a plan of action
  • Involve your outside accounting firm in assisting you with cleaning up your COA.
  • If available, implement the use of Sub-Ledger accounts that roll up to your main G/L Account (this provides further detail for financial and comparative analysis)
  • From the day your software is installed and you receive training, continue learning and training to stay up-to-date on changes and upgrades.

The first step to solving the Chart of Accounts problem is to recognize that you have one.  If you can relate to  any of the five signs shown above it’s time to start laying the groundwork to fix it.  But you cannot fix what is broken if you don’t have the tools or don’t understand how they work.

Do you have a story to tell about how you cleaned up your Chart of Accounts proliferation problem?  Let me hear from you.

 

 

 

 

 

 

 

Calling all Controllers & Accountants to reply!!!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

SDF Applications

Exceptional Apps.

Dennis Dean Smith

Cross From Your Ideas to Success

Crochet with Raymond

The mad adventures of a lesbi@n hooker and her siamese cat!

The Office Blend

ALL THINGS WORK LIFE

Law At Work

HR, employment, and health & safety advice in Jersey and Guernsey, Channel Islands

Live to Write - Write to Live

We live to write and write to live ... professional writers talk about the craft and business of writing

The Daily Post

The Art and Craft of Blogging

Tech

News and reviews from the world of gadgets, gear, apps and the web

TED Blog

The TED Blog shares interesting news about TED, TED Talks video, the TED Prize and more.

Matt on Not-WordPress

Stuff and things.

Philadelphia Estate and Tax Attorney Blog

Philadelphia tax, estate, corporate, small business attorney providing IRS tax representation, estate planning & administration, small business, probate, wills, trusts, tax planning

WordCamp Central

WordCamp is a conference that focuses on everything WordPress.

Leadership Freak

Empowering Leaders 300 Words at a Time

Late Blooming Entrepreneurs

Making it big in business after age 40

Small Food Business

The Soup to Nuts Resource for Artisan Food Entrepreuers

FUEL LINES

A voice for private company controllers

%d bloggers like this: