CFO Series: Unlock Better Insights from Chart of Accounts and Business Units (4 of 6)


It is fascinating how frequently businesses look to their accountants for developing the chart of accounts and business units rather than doing it as a collaborative organizational process.


The chart of accounts (COA) and information derived therein should reflect the business. For example, when I was CAO of a “$30 billion startup” (as we called it), we had problems understanding the details of benefits expenses and specific aspects of our business.

First, we had one line item in the COA for benefits. This line item included social security, Medicare, SUTA, health care, vision, dental, 401K …EVERYTHING in ONE line item. It required an accountant to create schedules to provide critical commentary on what was happening in this nebulous benefits category. The simple solution? Break out the necessary detail for each expense in the chart. It sounds simple, but lots of companies miss this.


The second example was that we recovered certain expenses from our customers. However, we did not have the revenue and expenses broken out for easy reporting. The recovery ratio was critical but not tracked. Once we created the visibility of these relationships, we realized we had a problem in a recovery area, and we made changes to the business processes.


Simple Changes: Chart of Accounts & Business Units

Changing your COA and business units (BUs) can range from easy fixes to very challenging change management. In the example above, we had to reimplement the COA and general ledger as a whole to fix the existing structure. However, smaller tweaks can usually get you what you need. Here are some considerations to think about as you look to unlock insights:

  1. Accountability: First and foremost, how does the organization want to hold itself accountable for performance (and more importantly, how should it)? Is it by a line of business? Is it by expense types? Thinking about the reporting end goal and considering the financial key performance indicators (KPI’s) is essential.

  2. Business Segments: Are there important segments of the business? Tracking margins? Topline sales only?

  3. Departments: In one organization we worked with, department heads had never seen their expenses. They just spent as they saw fit! For G&A expenses, something as simple as looking at the personnel org chart can determine what BUs to establish to track expenses. If someone has 10+ people, they probably need to be held accountable for their costs.

  4. Companies/Locations: Do organizations need to track information by company or location? Company and location tracking is something Sage Intacct does exceptionally well. We strongly advise tracking any site with its lease or building using a separate location or company. Ideally, you should include balance sheet data, so the actual capital spent on the location is easily identified.

  5. Listen to discussions: If the business leaders are routinely talking about an aspect of the business that is important to them, and the company’s financial statements do not allow for easy visibility to that aspect, then changes likely need to be made. What is vital to the business is vital to the COA.

We can help you evaluate and optimize your COA and use of BUs. Since it is not possible without significant effort to go back and change prior periods, these changes are typically future changes only. However, the business will be glad it took the time and effort to make the changes.


The time & effort will be well worth it!


Contact Thurston Advisory & Consulting - jim@thurstonadvisory.com

Insights for Profitable Growth

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