Originally published by Geni Whitehouse on LinkedIn: It’s Time to Re-Visit the Chart of Accounts

If you’re a business owner, you probably don’t spend much time worrying about your lowly chart of accounts. But an accountant on your team is responsible for managing all of the transactions that flow through your business. He or she determines how the transactions are coded, where they will appear on your financial statements, and ultimately, which category they will land in. He has to create new accounts as needed and distribute the chart of accounts to anyone in the company who is accountable for expenditures.

That chart of accounts determines the structure of your reporting, how you view the results of the transactions that make up your business, and even how a banker or investor evaluates your business. The structure imposed by your chart of accounts helps tell your financial story.

The new tax law has given the lowly chart of accounts (and your accounting team) new responsibility thanks to the limited deductibility of certain previously deductible expenses. Under prior law, we were forced to give up 50% of our deduction for business meals and entertainment, but the new law removes the final 50% for entertainment expenses. Most business and (many personal) chart of accounts have a single category for “Meals and Entertainment” that will need to be separated into two different accounts. In addition, money spent on employee outings, training etc should be in neither account but should instead be categorized separately. These employee benefit expenses, even if they include meals, are fully deductible under both prior law and the new 2018 rules.

While you are adapting to changes in tax law, why not take a deeper look at the information you are receiving from your accounting software. Are you getting the insights you need to make better business decisions? If not, you might need to change your chart of accounts to better align with your business needs. If you are using QuickBooks Online or Desktop you need to consider departmental reporting using Classes. If you are using a more comprehensive ERP solution like Acumatica, it's time to review your user-defined reporting segments and options to create management dashboards. You might also take a closer look at your operational and sales reporting to make sure your item codes, commission tracking, and customer and vendor categories make it easy to access the details you need to dig deeper into your financial results - so you can review margins by channel, territory, or product, for example.