So many companies fail to set up their charts of accounts correctly in QuickBooks. All too often as a professional bookkeeping and business financial management firm we observe charts of accounts resembling a collage of accounts in unfathomable format without any logical order, containing duplicate if not triplicate accounts, inconsistent protocols, and even inappropriate, if not undecipherable, names. When the outside finance professional receives this mess at tax time, the trial balance necessitates countless hours of reclassifications and groupings to connect and coordinate the amounts with the classifications required on tax returns and financial statements. At an average public accounting fee of $150 per hour, clients bear the costs of needless expensive clean ups, often tacking on an additional $500 to $600 per year to their annual financial management bills
There is no excuse for not having a chart of accounts set up in a format compatible with and reported on one’s tax return as well as one’s financial statement. Once set up, a simple click in QuickBooks prints a readable and well-organized financial report for internal management, bankers, other creditors, bonding companies, shareholders, et al. In addition, with some mapping to a compatible tax software program, the client’s trial balance amounts can be exported to the company’s tax return by the tax preparer with another click of the mouse.
And so, in order to minimize costs associated with the preparation of tax returns and those interim and year-end financial reports by an outside accountant, businesses would be well advised to adopt account names, account groupings, and an overall format predicated upon their requisite tax returns. This format need not be inconsistent with that used for internal and external financial reporting, since subaccounts would provide any necessary detail required by management and interested outside parties; while a simple click under report modification in QuickBooks re-arranges the expense accounts in alphabetical order, often the desired presentation for banks.
Setting up a robust and ordered chart of accounts is not an overwhelming task in QuickBooks. Through the availability of wizards and industry specific templates Accounts easily can be created, edited, and merged with a matter of clicks. If you need a starting point, grab your tax return or financial statement compiled by your outside finance professional, and enter the accounts found therein, decomposing summary accounts into subaccounts in QuickBooks. In addition, always remember to backup your company’s QuickBooks’ file before merging two accounts in the event you wish to reverse the process. By creating a more organized and efficient chart of accounts, you will not only save on financial management fees but you will improve your financial reporting in-house as well.
If your still not sure or have a Tax or Bookkeeping question? Please feel free to submit it via the contact us form on our website www.Simply-Bookkeeping.com or call us at +1 832.426.3845.