Is Your Chart of Accounts Stuck in the 1970s?

Is Your Chart of Accounts Stuck in the 1970s?

One of the value-added services we can offer clients is to align their chart of accounts with their tax form so that the numbers are easy to pull off at tax time.    But there’s an even bigger opportunity if we take a deeper look.

The traditional expense classifications on these forms are badly out of date.  For example, “Advertising” is listed, but “Marketing” is nowhere to be found.  Advertising and marketing are not the same!  Hardly anyone advertises anymore in our profession, but a lot of us market.  While we still need to comply with these forms, we need a different system if we are going to meet the needs of today’s startup businesses.

Changing With the Times

While the default charts of accounts provided with software are much more robust than our current tax forms, they still fall short.  Most haven’t changed since before the Internet.  Almost all haven’t changed for social media expenses.  They haven’t changed to account for cloud accounting costs.  They simply haven’t changed for a lot of new things we have expenses for now.

This disconnect provides accountants with a wonderful opportunity to custom-design a “modern” chart of accounts to meet the needs of today’s entrepreneurs.   My favorite area for improvement is, of course, accounting for marketing expenses.

Where Do Marketing Expenses Get Posted in Your Chart of Accounts?

When it comes to accounting for marketing expenses, I truly believe we need some big changes.  Where do you put business cards expenses?  Usually, it’s coded to office expenses or printing.  Where do you put the costs for a direct mail campaign?  Printing, postage, and professional fees (assuming you hired a graphics designer) contain these expenses.  Where do you put your social media expenses or the cost of your web site?  Since these expenses didn’t exist before most charts of accounts were designed, there might just be some changes that need to be made.

Shouldn’t you be able to see your marketing spend at a glance?

As both a CPA and a marketer, I want to know my total marketing spend at a glance.  I also want to know my selling spend.  That includes labor.  In addition to knowing my marketing spend, I want to know how much we’ve spent on each marketing channel as well as what it costs me to market each of our service lines.

Accountants that can answer those questions for their clients will be providing invaluable advice like a trusted advisor should.

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