To first understand how to benefit from your chart of accounts, you must first understand the reason behind having a standard chart of accounts. Businesses usually use a chart of accounts to organise their finances and different financial records to ensure that they have easy access to them later on when they might need it. Usually, there five different types of chart of accounts such as (not listed in order):
These different types of chart of accounts ensure that you are able to focus on different types of financial accounts that your company has without having to go through much hassle of finding them later on. In this article, we will be discussing how your business can benefit from having an organised chart of accounts.
Understanding your business revenue
Having a standard chart of accounts will allow you to understand your business revenue and it will make it more organised. A chart of accounts will also help you to see when your company’s profits are earning more in certain months or when it even valishes. It can allow you to estimate in which months your business does better than other months. Another reason why a chart of accounts can also help you to understand your revenue is because you are able to see how much cash your business has at its disposal which you can use to plan out your expenses for the upcoming months.
One other reason why a chart of accounts is so important and beneficial to your business is because you can track your expenses and see how much money you have spent on different essential utilities or even your disposable income. You are able to see how much money you have spent and can start planning to either cut down on some expenses or even allocate more money on certain areas of your business.
File your business taxes
For some businesses, one of the main reasons why they have a standard chart of accounts is to file their business taxes. As the chart of accounts tracks your business’ revenue, income and expenses, this makes it easier to file taxes when the financial year and tax season comes because everything is organised and compiled into your chart of accounts. This makes it easier for the accountant to look through and file your business’ taxes.
Keep track of your debts
Your chart of accounts can allow you to understand in depth what and how much money your business owes. This chart of accounts allows you to see any short-term or long-term debts that your business owes and it can allow you to spread out your revenue to pay your debts and get on top of them as soon as possible.
Although at first glance, a chart of accounts may be tedious to understand, it can greatly benefit your business by organising your business’ revenue, income and expenses to make things easier for you in the long run. It can be beneficial in many ways that you may not even realise.
Here at Tianlong Services, we provide accounting and bookkeeping services to small businesses and entrepreneurs. If consulting chart of accounts is something that you are interested in contact us today and we will be more than happy to assist you and provide a consultation to discuss your business’ chart of accounts.