How to Customize Chart of Accounts in Quickbooks Online

It’s important to record each addition or deletion of an account in the appropriate account. You can do that with the aid of the chart of accounts. Continue reading to find out how to modify the chart so you can better monitor the accounts for your company.

Your company’s accounting setup is supported by a chart of accounts. Your financials will feel disorganized if your chart of accounts is disorganized, and you’ll lack confidence in your ability to make business decisions based on the numbers. You’ll be able to review your financials with more assurance and actually use them to help you make some really important decisions if you customize your chart of accounts to fit your company.

How Can I Customize the Chart of Accounts in QuickBooks Online?

• In QuickBooks Online, select “Your Company” from the drop-down menu under “Your Company” and then select “Chart of Accounts.”
• You can add new accounts, bulk edit the ones that are already listed, and archive old accounts from the chart of accounts screen.
• It’s one thing to edit your list, but how do you make a chart of accounts listing that will help your business? Continue reading!

The Method Used to Customize the Chart of Accounts in QuickBooks Online

Yes, this does have a plan. You’ll benefit more from your financials if you customize your chart of accounts with more thought and planning. And, in all seriousness, a business owner can learn a ton from those reports. So what should you think about?

Think About Your Sector

Without a doubt, when customizing your chart of accounts, we must first take your industry into account. A construction company’s chart of accounts will be very different from that of a nonprofit, for instance. Additionally, a construction company will differ from a retail establishment.So, I want you to think about what accounts you need in order to operate when you consider your industry. A restricted funds account is required by nonprofits. In order to properly account for the percentage of completion accounting method, construction companies typically need accounts. Typically, retail businesses require inventory accounts. What accounts must be included when customizing your QuickBooks Online chart of accounts in your industry?

Establish Your Departments (or Your Segments of Operations)

Please be patient if you are saying to yourself, “I don’t have any departments.” You should also take note of this.

Every business has various operational segments or different categories of concerns to address when managing a company. Usually, depending on the kinds of expenses you incur, you’ll be able to notice these the most. What broader administrative responsibilities do you have? Do you even have a sales department, let alone is that a sizable portion of your company? Do you think that your marketing includes sales? Do you need to manage a lot of technology? Where do your facilities stand? Rent, utilities, maintenance, etc., are they a concern? I want you to identify these categories for your company. I’d love to see you think of about five, but no more than ten.

Here is why using these departments as a basis for analyzing your company makes sense. You should combine these accounts when customizing your chart of accounts. All of the department’s income should be grouped together, and all of the department’s expenses should be grouped together (because revenue and expenses show up in different parts of the profit and loss statement). You can, however, get a bigger picture perspective of your business to help you make decisions once you see your business (and the numbers) based on these operational buckets. You won’t get bogged down in the details, in other words!

Best Practices for Customizing the Chart of Accounts in QuickBooks Online

Therefore, you’ve thought through a plan of action before modifying your chart of accounts. Let’s now discuss some of the best techniques.

Upload Your Chart of Accounts

Your best opportunity to save time is with this. Everything needs to be planned out in an Excel document, which you should then upload to QuickBooks Online. Although it’s a little hidden in QBO, you can find the import option by going to the Chart of Accounts screen and selecting New from the drop-down menu.

If you need assistance determining which fields are required on the upload, QuickBooks Online offers you a sample file. The import procedure is very simple. Due to the fact that some of these accounts already exist in your QuickBooks Online account, you may experience a few errors in the end. Simply write the account number on those when you find them, and you’ll be good to go.

Make Use of Account Numbers

If I had my way, everyone would be required to do this! Why? This is due to the fact that using account numbers gives you the most flexibility when modifying your chart of accounts. Typically, QuickBooks Online will arrange your accounts in alphabetical order and according to (1) the type of account they are. Account numbers can be used to avoid the alphabetical order but not to change the type of account. Additionally, we can classify accounts based on those areas of our business when we use account numbers! Yay!! (OK – so most accountants cheer at this one)

Simply click the gear icon in the top right corner of your QBO screen to enable account numbers. Pick “Account and Settings” from “Your Company” after that. Afterward, select “Advanced” and enable those account numbers.

Once you’ve done that, go to the Chart of Accounts screen and bulk edit your accounts (clicking that pencil icon). Alternately, you could upload a template that has everything completed for you.

Use Sub-Accounts to Your Advantage

You have the choice to set up sub-accounts inside of each account. Actually, you can build sub-sub accounts to descend five layers. I only advise using one level of sub-accounts. Here’s why: It enables you to summarize your financial data into a clear, comprehensive view of your company.This gives you the freedom to record transactions with a little bit more detail, but you can still view your company according to the segments we identified above. In the long run, this will also enable you to begin assigning those various business segments to managers, who will then be required to report to you. This is how you prepare your company for expansion.

Simply go to the new account creation page and choose the option to create the account as a sub-account. You will then see a drop-down menu where you can select which account should be the parent of the new account you are creating. Simply ensure that your parent and sub-accounts are of the same account type

Limit the Listing of Your Account

Finally, we are going to make you to restrict the accounts you list. You can only have 250 accounts in QuickBooks Online Simple Start, Essentials, and Plus. You don’t need that many, I could argue with you all day. But at the very least, stay away from these errors:

Establishing a Profile for Each Vendor

Most people do this in order to keep track of their spending with various vendors. There are other reports in QuickBooks Online that can help you figure this out as long as you are entering the vendor name on your transactions. Even better, you could modify your P&L to only display transactions for a specific vendor.

You might be paying your vendor for a variety of different things, which is another problem. Perhaps you have an IT consultant who is helping you maintain your computers while also helping you buy them. For example, you should expense those transactions into separate accounts for computers and consultants.

Making an Account for a future expense you anticipate incurring

There will be a lot more paperwork to sort through if you open a lot of accounts for expenses that you will incur in the future or even just once a year. I prefer to just make a “Other” account instead. Other Administrative Expenses or Other Travel Expenses could be the category. It is a great place to record items for which you are unsure whether they apply to one of the other accounts. If you do encounter numerous transactions that call for a separate account in the future, you still have the option to add an account.

Summing Everything Up

So those are our suggestions for customizing the Chart of Accounts in QuickBooks Online. It does require some preparation and strategy, but the benefits for you and your company could be enormous. Please don’t hesitate to get in touch with us if you have any additional concerns.

Frequently Asked Questions (FAQs)