PROFIT MASTERY PRESENTS
The Profit Move
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THE NUMBER
100 to 200
line items on a typical chart of accounts
15 to 20
the number that works
Most small businesses carry 100 to 200 line items on the chart of accounts. The right number is closer to 15 to 20.
(The chart of accounts is the list of buckets every dollar gets sorted into. It decides how many lines show up on your P&L.)
More categories feel like more information. What you get instead is a P&L that reads like a mile-long CVS receipt. Nobody reads a CVS receipt. Including the owner who asked for the detail in the first place.
Source: our own count from years of reviewing owner financials, not a published study.
Your chart of accounts is too long. Full stop.
What we tell owners who show us their books
▍WORTH KNOWING
Three weeks to September 15. S corp or partnership, and you extended back in March? The return is due September 15. That is three weeks from today. Individuals and C corps who extended get until October 15.
The filing is the easy part. Cleanup is what eats the month.
Unreconciled accounts. Personal charges on the business card. A balance sheet nobody has touched since spring. Your accountant finds all of it in September, then bills you for the archaeology.
Clean books make September boring, which is the whole point.
▍THIS WEEK'S MOVE
Count the lines. Cut the singles.
Ten minutes, and you can hand most of it off.
Pull your P&L for the last 12 months with a column for each month. Count the expense lines. Write the number down.
Now find every line that got used twice or less all year. Those are the ones to kill. They don't come up often enough to justify their own line.
Send that list to whoever does your books with one instruction. Merge each one into the closest account that already exists, starting next month.
Two things to tell them:
• Don't restate history. Going forward is fine. Rebuilding twelve months of prior periods costs more than the cleanup is worth.
• Keep anything a lender, a franchisor, or your tax preparer specifically asks for. Everything else is fair game.
On a franchise system with a mandated chart of accounts? You probably can't delete lines. You can still group them, and grouping gets you most of the way there.
Same answer if you run job costing or carry inventory. Keep the detail. Keep it in the system built for it, instead of on the face of your P&L.
Doing your own books? Same exercise, one sitting.
None of the detail disappears. It still sits at the transaction level, ready the day you go looking for it. What you get back is a P&L you can read in 60 seconds.
▍THIS WEEK'S ARTICLE
Are Your Books Actually Good?
Saturday's piece opens with two questions we ask new members. Are you getting financial reports on time? Do you believe them when they show up?
Most owners have never been shown what a good set of books looks like, so the second one is hard to answer honestly.
It walks through seven checks. The chart of accounts is one of them. The other six are where the surprises usually are.
There's a bookkeeping health checklist too. Like the post and comment BOOKS to get it.
Free to read. Substack will ask you to click once first.
▍UPCOMING
Price for Profit, Not Just to Win the Job
Friday, September 4, 10:00 to 11:00am ET, virtual. $39, included with PM Pro. Register
Office Hours for PM Pro
Friday, September 11, 10:00am ET. Members only. Details
Before you can fix a number, you have to be able to find it. Four calculators, about a minute each.
No signup, no email.
Run the count this week? Hit reply with your two numbers, before and after. We read every reply.
And if you want an introduction to the bookkeeping firm we refer owners to, reply with the word bookkeeper.
Thanks,
The Profit Mastery Team
Know your numbers. Command your cash. Scale with confidence.
The Profit Move is education, not personalized financial or investment advice.