What is a ‘Perfect’ Chart of Accounts? Does it even exist?

Over the years, accountants have often thrown up questions like these. It would certainly make life easier for everyone, wouldn’t it? But instead, you start a new job and inherit a diabolical mess, which begins with sorting through a Chart of Accounts that may contain anything from a hundred lines to well into the thousands. Could this be prevented if we embraced one uniformly perfect Chart of Accounts?

Unfortunately, the answer is no – such a thing doesn’t exist. The reasons are that every business is unique, and the way each business analyses its financial results is subjective.

There are a number of events that can trigger the need to develop or redesign a Chart of Accounts: it could be a new start-up company; possibly the appointment of new senior accounting staff; or maybe the opportunity has arisen because of an impending implementation of a new ERP system.

There are many books that focus on this topic that can provide assistance when developing a chart of accounts, but in my opinion the answer usually resides in the minds of senior management. It is vital for any business to clearly establish the most critical success factors to gauge company performance, and ensure it has the tools to be able to measure them reliably, accurately, and efficiently. A poorly designed Chart of Accounts can lead to difficultly in analysing performance, and significant inefficiencies and inaccuracies in financial performance reporting.

As a leading implementer of Microsoft Dynamics NAV, Fenwick Software‘s consultants are often asked to provide assistance to develop or redesign a chart of accounts when a business has the rare opportunity to migrate from an old system to a new one. Although our consultants are highly qualified to guide a business through the optimum use of the analysis tools within NAV, such as dimensions and analysis views, key stakeholders should take ownership of the opportunity to implement a fresh chart of accounts that will allow them to report their financial results as accurately and efficiently as possible.

In hindsight, maybe the Perfect Chart of Accounts is out there, somewhere…the only problem is it’s going to look different for everyone.