We have got to the point where businesses will generally use some form of accounting software to track their income and expenses which is great. Makes life so much easier. But do you actually get useful reporting on your cashflow from the software, or do you just do it because you have to? Just getting it done.
Software programs will have a Chart of Accounts built into them, or one will be added by your Accountant. A chart of accounts is like a filing cabinet where you file your expenses. You can then look at each file and see how much money you spend on that particular thing. For example, you may have a file for things like petrol, car expenses, stationery or office equipment.
How well you categorise things into these files will make a difference on how well you know the numbers in your business. Once you know the numbers in your business, you can make sound decisions on growing your business.
Whilst a lot of business owners will use software to categorise their expenses and that helps them keep track of where they spend their money, what they don’t realise, is that you can customise the Chart of Accounts to suit your business. This means the categories you file your expenses into, can be more relevant to you and your business, making your record keeping more useful.
If you are already using an online accounting system with a chart of accounts, it is relatively easy to amend the chart of accounts. You could make the changes, then start organising your expenses into those new filing cabinets and you will get the benefits of having more useful reports going forward. If you are keen, you could also go back and move things from your old filing system into the new one. This will give you useful reporting for a historical period – certainly could be worthwhile.
Regardless, make sure that your chart of accounts, and where you file your expenses, is suited to you and your business, and not just the company who created the software program.
If you would like any assistance with this, we are more than happy to help you out. Get in contact with us via email, or phone the office on 02 6056 1929.