In my history as a bookkeeper I have not yet worked with an accountant that likes a dense Chart of Accounts. As the owner, you may want to know exactly what marketing campaign made money or widget sold well but your accountant most likely won’t care about that level of detail.
This is where items rule! Think about the way you sell your services or products. If you are a general contractor, you may sell carpentry, plumbing, HVAC services and definitely want to know how and where those funds are spent and income is earned. If you are a florist, tracking the types of flowers, plants or arrangements you sell will go a long way in tracking trends. And don’t forget those widgets…
But from an accounting perspective, do you need to know more than your income and expenses? Yes, there is a need for individual expenses and I am certainly not saying that all you need is a 2 line Chart of Accounts but does the person handling your data entry in Quickbooks need to remember the exact income or expense account number/name? The answer is no.
By using items linked to the individual income/cost of goods/expense accounts, you can collect as much detail as you desire without the need to over complicate your Chart of Accounts.
And it makes it a much easier way to handle all of those receipts. Whether we like it or not, the best way to defend an IRS audit is a receipt showing an accurate record of your purchase. Why not used pre-printed stickers with the QB item to apply to these receipts.
If you have field staff that make company purchases, they can turn in their receipts with correct item already noted. With pre-printed labels, no more handwriting questions.
Think of the time and cost you will save when your data entry person is able to quickly enter the data without the need to know a lot about your business and this means if that data entry person has been you, the owner, you can hand that responsibility over to your office support staff (you have an admin, right?) knowing that the details won’t get lost and focus on growing your company.
And if your bookkeeper does all of your data entry, think about how much faster the entries can be made when you hand over tagged receipts.
Just a thought.