Which has higher brand awareness, Coca-Cola or Microsoft Office? Though Apple’s iPhone is giving these companies a run for their money, I would argue that Microsoft Word and Microsoft Excel are the most recognized products in the United States. Our country is run on those programs with an estimated 80-90% of businesses running on Excel. Many companies run their data from Excel into graphs for upper level reporting but Microsoft offers another program, PowerBI, which provides a data visualization program that is under-utilized and brings several benefits to the table. 

It is estimated that around 26% of companies use data visualization in their operations and those companies are usually leaders and high-growth companies operating ahead of their counterparts.(Click for article) I would argue that many of these companies are inefficient in their use of data visualization but the effort put forth in learning and understanding their own company through data visualization is paying off in a big way. Many of these companies are using data visualization to quickly diagnose increases and decreases in product lines along with providing quick and simplified data to upper management. Easy-to-read graphs and dashboards can make decision making easier, while automation within data visualization leads to lightning fast problem solving.

Imagine having a dashboard which shows sales of a group of restaurant franchises. All of the franchises except for one are seeing a 5-12% increase in sales each quarter. This would be quickly identifiable through a data visualization program like PowerBI, unlike if this data was shown in a numerical spreadsheet.

Conditional formatting and pivot charting has been around for a lot longer and were previously known as best practices within corporations. While these functions can bring similar insights to companies, they have far less functionality and lose in the long-run when compared with the flexibility in data visualization programs.

I recently attended a conference in Dallas where data became a priority in conversation. Within the multi-family(apartments) industry, there has been a large push to bring more data into the operations of a community. This data is aimed at reducing utility bills and trash while increasing security of the complex along with happiness through picking the right amenities. If you track water usage and electricity usage on an hourly basis, you know what I am talking about. They gather this data. It gets sent to a vendor. Vendor replies with a reporting dashboard on usage. They deliberate the results within their community operations or they use this reporting to show higher ups their status.

Within one of the conference panels, I asked how they delivered this data to people who make decisions. One panelist discussed using data visualization and how Power BI dashboards were built to manage her community. The other three individuals on the panel discussed how they utilize a vendor and it usually takes approximately one month to get the data back and then usually there isn’t much action based on the lack of actionable insights in the report. After the panel was over, I approached one of the panelists who seemed to be at an impasse with this data and asked when he was going to take advantage of this huge database that he was so proud of having. He detailed that this was a long process, something that would take months for the vendor to create, something that would cost $20,000-$30,000 for each of the communities he oversaw. 

I asked him what was available. “Does your data collecting device vendor have an API you can integrate with?” “What do the vendors return when they place this data into a report?” “What do you think you can get out of this data if you analyze it properly?” These are questions he did not know the answers to, but they are the questions which should foundationally be asked when developing a data visualization project. The panelist asked one of his co-workers for the answers and as expected, this was a very quick and easy project to get the data in one place. 

The daunting task which was going to cost more than $1,000,000 for his portfolio was really a one-person project which might take a month. In all, by asking the right questions about how to involve data visualization into the organization, I might have saved this person $800,000 which the other vendor would be more than happy to take. 

Data visualization does not have to be a daunting task, it should be fun for your organization; using the information you currently have to discover the ins and outs of the business you are running. Through PowerBI, you can identify optimizations, current deficiencies, places for improvement, and additional data points you want to include in further analysis. When you change your philosophy from, “What have we always done?” to “What are the possibilities?”, you start to become part of the 26% high-growth and leaders within your industry.

Hopefully this was a helpful dialogue to help inspire data visualization you want to use in your company. As always, feel free to reach out if you have any questions or would like to discuss your bookkeeping needs.

The chart of accounts is an essential foundation to any business in understanding the financial health of the company. When a company installs a chart of accounts, it separates assets,  liabilities, equity, revenue, and expenses into different categories that allow for journal entries to be classified within the general ledger. Each account that is established will have its own name such as Marketing Expenses, Accounts Receivable, or Miscellaneous Expenses and may be accompanied by a number. The numbering system can help categorize accounts into each major class of account where asset numbering starts with 1, liabilities start with 2, equity start with 3, revenue starts with 4, and expenses start with 5. Though numbers are optional, they can significantly help with an understanding of journal entries and make the general ledger easier to review. For example, 101 Bank Account (****) is an asset, 201 Accounts Payable is a liability, and 520 Marketing Expenses is an expense account.

A chart of accounts is likely going to be different for every business due to every business having different transactions and wanting to group those transactions differently. The naming of the accounts is normally standardized across industries and within the accounting profession as a whole. Your chart of accounts should be easy to understand while also fitting normal operating activities of the business. Just as you do not want too many accounts (i.e. each vendor classified in a separate account), there also should not be a significant portion of your transactions classified under a vague heading such as 560 Miscellaneous Expenses.

What many believe to be purely a component of classification is actually one of the more powerful tools that accountants use to diagnose and analyze a company’s financial health. By preparing the Chart of Accounts properly, you can identify things you want to track and easily separate the items when referring back to any time period through a financial statement based on that time period. For example, if I owned a building, office equipment, and a couple of vehicles, I could classify these all into one account being Property, Plant, and Equipment which is acceptable on the Balance Sheet. I could also classify these into 3 different accounts, Building, Office Equipment, and Vehicles which would allow me to better understand how invested I am into each of these categories.

More complicated situations can exist where you may have many large product lines which are held under one company but are completely separable. Numbering can dramatically help separate these activities within your operations. Instead of revenues from both lines starting with (4***), you could account Line 1 with (41**) and Line 2 with (42**). This will allow your income and expenses to be easily distinguishable while also keeping the financial statements easy to prepare and consolidate the 2 product lines.

For my business, I track marketing expenditures in additional detailed accounts. Website expenses, business cards, social media advertising, t-shirts, etc. should all be classified under Marketing Expenses in most situations. For myself, I have social media expenses accounted for separately from other marketing expenses. I like to keep a closer eye on how much I am spending on social media which has little residual value compared to other marketing (i.e. business cards and t-shirts). This separation also allows me to calculate ratios quickly as I plan to spend a percentage of revenue on social media. Preparing my chart of accounts in this way allows me to prepare financial statements in future periods and to review social media expenditures over time more easily. I also distinguish between various revenue activities. For example, some revenue accounts are: accounting services, website services, and I leave the opportunity to account for other service classes so that I can understand what revenue types are making me the most revenue.

It is important to plan this chart of accounts on the front end of your business journey. Though you can change your chart of accounts at any time, making a change reduces the ability to compare time periods which makes it difficult to perform long-term analysis. In my time as an auditor, making changes to the chart of accounts was not only painful for the client but also for the people preparing the financial statements. It is best to consult with your accountant when creating your chart of accounts as many accountants will have a knowledge base of best practices you can follow. A high quality accountant will be able to guide you through build-out along with identifying things which you might not think about that are trackable.

Hopefully this was a helpful dialogue to help you make better decisions when building the chart of accounts you want to use for your company. As always, feel free to reach out if you have any questions or would like to discuss your bookkeeping needs.