What Mistakes to Avoid in a Chart of Accounts
The chart of accounts (COA) might sound like accounting jargon, but it’s one of the most important parts of your bookkeeping system.
If it’s built wrong, everything else-your P&L, taxes, and decision-making-breaks down.
Here are the top chart of accounts mistakes to avoid and how to fix them before they cost you time and money.
1. Creating Too Many Accounts
More isn’t better. Some business owners add an account for every vendor, transaction type, or project. That leads to:
- Confusing reports
- Duplicate categories
- Inconsistent coding by your bookkeeper
Fix: Stick to high-level categories that match how you review performance. Let sub-accounts serve a clear purpose-or don’t use them at all.
2. Using Vague or Overlapping Names
If your COA includes both “Subscriptions” and “Software” or “Marketing” and “Ad Spend,” expect confusion.
Fix: Consolidate categories and define clear rules for where expenses go. Consistency matters more than granularity.
3. Ignoring the Tax Implications
If your COA structure doesn’t map cleanly to IRS tax lines or business deductions, you’ll waste time during tax prep-and maybe miss out on deductions.
Fix: Align your chart with Schedule C or business tax return structures. Your CPA (or RemoteBooksOnline team) can help.
4. Forgetting the Future
You may only have one product or service today, but if you plan to expand, set up your COA to grow with you. Otherwise, you’ll end up with a messy rebuild down the road.
Download Our Free Brochure →Fix: Think one year ahead. Group income and expenses with scalability in mind (e.g., “Product Sales” vs. “Service Revenue”).
5. Not Reviewing Annually
A COA that worked two years ago might not reflect your business today. If you haven’t reviewed it recently, chances are it’s outdated or misaligned.
Fix: Schedule a yearly COA review-ideally before tax season. We include this as part of our year-end prep for clients.
Test Case
Client: Independent marketing agency with 85 income and expense accounts
Mistake: Every client had a unique revenue account. Every tool had its own software expense line.
Outcome: P&L was unreadable. Tax filing was delayed 2 months.
RemoteBooksOnline Fix: Consolidated accounts, mapped income by service type, and streamlined software tools into one “Subscriptions” account.
Result: Saved $1,200 in tax filing fees and gained accurate monthly reports.
FAQs
Can I rename or delete accounts in QuickBooks?
You can rename them. Deletion is discouraged unless they were never used. Archiving or merging is safer.
How do I know if I’ve created duplicate accounts?
Look at reports like P&L by account. If multiple line items reflect the same category, you likely have overlap.
Will you fix my chart of accounts if I sign up?
Absolutely. COA cleanup is part of our QuickBooks Catch-Up and Monthly Bookkeeping onboarding process.
Conclusion
Avoiding COA mistakes isn’t just about being tidy-it’s about making your financials useful and audit-ready.
RemoteBooksOnline helps small businesses like yours clean up their books, optimize the chart of accounts, and stay tax-ready year-round.
Need to fix errors or outdated data in QuickBooks? Start with our expert QuickBooks cleanup services.
If you’re behind on your books, our catch-up bookkeeping services can help you get current fast-no stress, no mess.
Stay organized and tax-ready year-round with our flat-rate monthly bookkeeping services.
