QBO Tech Tip - Why You Should Use Numbering In The Chart Of Accounts
Numbering in the QBO Chart Of Accounts is turned off by default.
You need to go into the company settings and turn it on.
Which I highly recommend you do!
You are going to love using numbers in your QBO COA - for so many reasons:
You will experience extra efficiency-joy by numbering your COA and using a consistent numbering system.
Code transactions easily, manually or from an integrated app (like Dext, for instance)
Using numbers can speed up data entry and make it easier to navigate through the chart of accounts, especially if your clients have many accounts
If Income Accounts are always a 30000 account, you can start pecking in the “3” to surface income accounts rather than trying to remember what your clients’ income account names are
Reduce the possibility of errors
If Expenses are always a 50000 account, you will not mistakenly post to an Income Account like you could with names that are similar for both
Collaborate seamlessly on YE Adjusting Entries
The tax software needs numbering to map the returns properly
If numbering is not used in the file, the Year End AJEs may be hard to line up correctly, causing unnecessary frustration for whoever is posting them
Even if the AJE account name isn't exactly the same, it’s easy to match to the numbering system
When I was a non-numbering bookkeeper, I would point the judgey-finger at the tax pro for not matching the AJEs to the COA. Now, of course, I realize it was my fault for not implementing numbering.
Of note: If you don’t do taxes and don’t have a standard COA numbering system - yet - you can use the numbering your collaborating tax pros use. Ask them for it, I can guarantee they will be impressed that you want to collaborate at this level with them :-}
What else is to be gained by COA numbering?
Analysis
Numbering accounts makes it easier to analyze financial data
You can quickly sort and filter information by account number
Reporting
By assigning numbers to accounts, you can ensure that they are listed consistently in financial reports, making them easier to read and understand
Customization
Numbering sub accounts allow you to create a customized chart of accounts that reflects your clients’ unique business needs and structures
Here is a tip from a friendie and APIA*, Sherri-Lee Mathers, of Balsam Way Bookkeeping:
Quickly identify rogue accounts; added by an app or a human
“If you create a chart of accounts with numbers, it will be easier for you to spot when an app integration creates their own posting accounts in your COA. This is especially helpful if you missed a step in mapping the integration, or you renamed the account.
For instance, some payment processors have their own accounts, so if you have merged their account with one of your own or renamed it, the integration will create a new account to post to. Similarly, in QBO Payroll if we have employees mapped to specific accounts and add a new employee and forget to map them, currently QBO will create a whole new set of generic accounts. These rogue accounts are easy to spot in COA, your P&L or BS as they won't have a number.”
And another tip from Cathy Volk, of Accountable Business Solutions - as a reply to my email of this blog.
Great post! I have had chart of account templates for different industries and forms of organizations since the mid 90’s. I enforce that all my clients must turn on account numbers 😊
The only thing that changes across my form of organization templates is the naming of the equity accounts by shareholder, member, partner, etc
A final word on COA numbering:
Jason Staats (and me!) think we need to take it one step further and implement industry-wide numbering standards.
When I first decided to implement numbering in my clients’ files, I naively thought I’d just search the internet - we used Google back then, not ChatGPT4 - crazy, eh?) - and it would spit me out the standard numbering system. I didn’t take Accounting at University, so this was news to me. I was astounded that it wasn’t (still isn’t) a thing. It just makes sense to line everyone up on a standard system that will lead to consistency and compliance across our industry. I could write a whole other blog on the benefits of industry-wide numbering standards!
And, I would agree with Jason that it will help use automate bookkeeping. Allowing us to use AI to our advantage, as accounting professionals, to provide greater value in our client advisory services.
*Accounting Professionals I Admire
- All of my template workflows include details like this, and my Standard Operating Process Guides are start to finish standards for apps and internal processes
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