IMPORTANCE OF A GOOD CHART OF ACCOUNTS

Creating a well thought out and structured chart of accounts at the start of an implementation project is an ideal opportunity to plan for historical shortcomings, future growth and strategic or analytical requirements – here’s how Vizi approach Chart of Account creation.

How you plan your chart of accounts is a vitally important process that will impact a number of business processes ranging from data input and the associated complexities, through to ease and detail available for reporting, analysis and business operations. Keeping the end goal in mind and consulting with all business departments for their input, is an excellent starting point.

A chart of accounts typically consists of 4 main elements:

1. Type – This will relate to the level of classification that you require, ie: Income Statement or Balance sheet

2. Code – This will be the strategic numbering sequence that you assign to each account.  This is where the majority of your time should be focused and requires the most planning. The required length of your sequence will be determined by the level of classification (Type) you will be using, followed by a further breakdown and then followed by the number of accounts that will be required below each section. If your system does not have analytical functionality, you should build this into your sequence structure at this point. This could range from Sales Rep to Department or Product Class – which in turn could be broken down further.

The sequence for Income – Sales – Product A with analytical structure of Product class will look as follows: 1/1/001/100 = 11001100

3. Name – This will be the short descriptive field that will aid in searching for the correct account if the user is unsure of the code, ie Product Sales – Product A

4. Description – This is an optional field where you can list details and examples of what the account is used for.  This is a very useful addition if you have started a new chart of accounts that users are still becoming accustomed to and will guide users on which accounts to choose.

One of our very first ERP implementations was done on a cold winters day back in the year 2000, for an organization with many complexities.  The organization has grown tenfold in these past 21 years and still use the very same chart of accounts.  It has served them well, given structure to their posting and provided granular reporting.

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