Moderated by Emily, Digital Transformation Consultant at Hyperbots
Emily: Hey, everyone, this is Emily, and I’m a digital transformation consultant at hyperbots. I’m pleased to have John Silverstein on the call with me, who is the VP of FP&A at Extreme Reach. So thank you so much for joining us, John.
John Silverstein: No problem. Thank you for having me.
Emily: So, John, the topic that we’d be discussing today is managing and scaling the chart of accounts in Quickbooks online. The 1st thing that I ask you is, what are some of the key considerations when setting up a chart of accounts in Quickbooks online for a small business?
John Silverstein: Yeah, when setting up the chart of accounts for QuickBooks online, it’s critical to be simple and logical. But you also need to look forward a little bit to the growth of your business. Look at your business model and the industry standards because you want to be aligned with how that’s going to be, and how you can look at your financials compared to either other companies, or if you eventually go for a sale or you acquire another business. It’s good to be in line with that. So assets, liabilities, equity, revenue, expenses. You want to make sure that those are broken out into the proper categories for that industry and that it also meets your regulations. You wanna enable the account number early. This is a big mistake. I see a lot in the smaller businesses that they just name, and their names are all over the place, and they change over time. So it’s hard to trace and understand the data. As it moves. And so it’s if you enable the account number, and it’s easier to integrate into work with other systems. As you and your business grow. So it’s important to implement that as early as possible. It. It creates a little bit of extra work, but it’s not that much.
Emily: Got it. So, John, as a business grows, how can it maintain an effective chart of accounts in QuickBooks online without having to move to a more complex ERP system?
John Silverstein: Yeah, it’s surprising how flexible and how good and what rigor and things you can get into QuickBooks online if you enable the right things. So it’s important to work with your accountants, and if you don’t have one internal, but if you are the accountant and things that you look at and leverage. You know the platform of QuickBooks like classes, locations, and the other dimensions that are there. So you don’t have to overcomplicate. I see a lot of companies that don’t enable classes until it’s too late. And again, it gets really hard. And you’ve overcomplicated your chart of accounts to try to do something that really could have been solved by classes or locations and things like that. So it’s also important to try to understand what those dimensions are. It goes back to the 1st question about industry and things that you do. So segment the data. You have to think about how you’re gonna measure and monitor the business review and monitor and make sure that that chart of accounts is always in line with how you’re gonna do it. If there are any redundant accounts close or inactivate them, make sure they’re properly categorized. Use sub-accounts, use a hierarchy that helps out. And you can go pretty far with QuickBooks online. I’ve been in companies that have made it to that 100 million dollar mark on QuickBooks. So it. It does scale more than what many would expect.
Emily: Got it. Got it. So any common mistake, John, that you’d have seen small businesses make when setting up their chart of accounts in Quickbooks online?
John Silverstein: Yeah, one of the things is there, the biggest thing. And this goes across the board. Any system has too many accounts, and they don’t enable the other dimensions and things. So then you try to use an account for everything, account per vendor, account per customer, and things like that Just remember that there’s reporting and things that can get you there without having to break it out in your chart of accounts that overcomplicate it, and then there are more mistakes, and it causes a lot of confusion as you bring in new people Or you might have to have another accountant or other people look at it, or your management looks at it and things, and it gets more confusing, and it even makes it harder for audit as well, and it creates a lot of clutter.
Emily: Got it, got it. So how can businesses create a flexible and scalable chart of account structure that supports growth?
John Silverstein: Yeah. The best way to do this is to make sure that you have a numbering system that allows for the expansion. And to do, add-ons and things, and to make sure that you’re you, you can change the names without affecting other reporting and things you don’t want to leave gaps between you. You need to leave the gaps in between the account numbers, so you can add accounts and easily use sub-accounts to track more detailed information. So you can have the details when you need to answer certain questions and have it at your fingertips. Make sure that you have that available, and then you plan on growing. So you have those spaces and things, and then this approach will allow you to keep it simple but also have detailed financial analysis and reporting.
Emily: Okay, why, exactly, is it important for different businesses to regularly review and optimize their chart of accounts in QuickBooks online?
John Silverstein: Yeah, it’s critical to ensure that the accounts reflect how your business is today. If you’re selling new things, maybe your models change. Maybe you were initially transactional or your pricing wasn’t, it was more value pricing and things like that. Or, yeah, when you’re smaller you might have more to give. But as you grow and things, it’s critical that you have the information. There, the accounts reflect your current business operations. What does your cost structure look like, are you in? Is everything in the house? Are you doing things yourself? Are you outsourcing those types of things? You must have that at your fingertips. You also don’t want to have to roll up many redundant accounts or account hierarchies even to try to get an answer in your financials, so make sure that you continue to look at it. So you know which accounts to use when you’re answering the questions that you have on your finances, and it also alleviates the errors of things going to too many different places. And then you have to try to figure out how to map it all back together.
Emily A: Got it. Got it. So, John, can you explain the role of AI in maintaining charts of accounts, integrity, and QuickBooks online?
John Silverstein: Yeah. So AI, and this is something that’s gonna have a significant impact. Going forward is on the chart of accounts because it can keep that integrity, it can also have the knowledge to recommend and detect errors between how? What’s posting? To which accounts, and as long? It can make sure that the definitions are consistent on what’s going on, and it can recommend even when you should create a new account and break it out. It could also tell you that you have duplicates or missing entries. So AI algorithms, it’ll enforce consistency in accounting. It’ll make it easier to do analysis, it’ll make it easier to be compliant. You’ll have clarity on where things should be booked, and why. It can also have predictive analytics to suggest. Hey, you need a new account. You need a subaccount. This is a hierarchy and to go into the patterns of transaction history to recommend that. You can also have real-time data validation. So your book closes and things will be faster and more accurate. This is critical as you go through to make sure you have consistent financial data.
Emily: Got it so little bit about ERP migration, John. So how can I help a business that is considering migrating from Quickbooks online to, let’s say, a more complex ERP system like NetSuite?
John Silverstein: Yeah. So if AI could help you start getting there, the more you’re aligned with how the bigger Erps work and you have classes already set up. You have the things set up in QuickBooks online that are more aligned with NetSuite. It’s easier to migrate, and your process is if and flows. If they’re proper and doing the same things as some of these other Erps, it may make it better data, integrity, and continuity, and easier to go through the conversion without having to do a lot of data cleanup it also can automate your reconciliations and validations through the migration to make sure that everything’s in sync it’ll save a lot of time. Reduce the errors. Maybe the Erps will get a little bit worse. 3. Letter acronym. It will become a little more doable and foreseeable to go into an ERP that makes more sense for your business without a huge lift in cost and time.
Emily: Understood. And just one last question, John. So what are some best practices for using QuickBooks online as a growing business? And you know, when should a business consider moving to a more robust or more? Do you know the nuance?
John Silverstein: Yeah. So the one thing I would say is that you need to try to get as much structure as possible in QuickBooks with numbering systems. Reviewing the chart of accounts. A lot of this structure and things and controls in QuickBooks tend to be manual in the process where you have to do manual reviews or have AI review it. Now you have that option. But you didn’t in the past be a business should consider moving to a more robust ERP when they’re getting into more complex workflows and complexities like consolidations and things. If you have multi-entity management QuickBooks, don’t really. It’s a separate entity and roll-ups are hard and complex. They’re getting a little bit better, but it doesn’t. It’s not made for that when you get into some of the currency and other things that you might face as a larger enterprise. Quickbooks aren’t made for that, or designed for that. So if you need more sophisticated reporting, you need to have more data too. It’s probably better to move on to a tool like Netsuite.
Emily: Got it. Got it. Thank you so much, John, for being here and talking to us about managing and scaling the chart of accounts in Quickbooks online. It was great having you. And it was a fruitful discussion. So thank you.
John Silverstein: No problem.
