One step that is important with the management of your chart of accounts is to clean them up on a regular basis.  This is especially important to do when you have been using a chart of account for a period of time.

Prior to undertaking these steps you need to make sure you understand the impact on your accounting system.  For example, if you delete an account because for the current year it has a zero balance, this may also delete the account in previous years where transactions may have been allocated to this account.  Therefore, you need to decide if you really want or need to do this.

Alternatively you may be able to save previous years or partition them off such that any changes or updates made in the current year cannot impact on previous years.

Furthermore, and as previous discussed in earlier posts, the chart of accounts should be linked to the strategic and business objectives of your organisation such that financial reports support the decision making process.  Therefore, before commencing this process you should be clear about these objectives which may have changed since the original chart of accounts was created.

For example, when Robin Hood first began liberating money to give to the poor, his target was probably Prince John and perhaps the Sheriff of Nottingham.  His chart of accounts would have reflected that.  Over time he may have expanded his reach to target all the dishonest nobles in his area.  Consequently his chart of accounts may have needed some revision to match his current objectives.

Make sure that any changes you make to update and revise chart of accounts will allow you to make the decisions required by your current organisational strategies and objectives.

Part 2 will discuss the actual steps to follow to clean up your chart of accounts.