Most of what you set up in accounting software can be changed later at no cost. Your logo, your invoice layout, your payment terms, your email templates. Get them wrong and you fix them on a Tuesday.
Your chart of accounts is not one of those.
It’s the list of buckets every transaction lands in, which makes it the thing every report is built from. Change it after a year of trading and you’re not editing a setting, you’re deciding what to do with a year of history that was filed under the old shape.
Ten minutes now. An afternoon later.
What it actually decides
Not “where does this go” for one transaction. It decides what questions you can answer without manual work.
If all your income lands in one account called Sales, then “which part of the business actually makes money” is a question you answer by exporting to a spreadsheet and sorting it by hand, every time you ask. If installation is separate from supply, the profit and loss just tells you.
The same applies to the costs you care about. Materials against subcontractors. Vehicles against premises. Whatever the split is that you’d want to see, that’s the split the chart has to have, because a report can only group what the chart separated.
What to actually do
Start from the standard chart, not a blank page. You’ll get a structured set of accounts that already balances and already covers the ordinary things. National schemes are there too if you keep books to one, but the general default suits most businesses and you should take it unless you know why you’re not.
Then make exactly three passes over it.
- Split the income the way you’d want a report to split it. Two or three revenue accounts beats one. Twelve beats nothing, and you will stop using nine of them.
- Split the costs you argue about. Whatever you and your accountant disagree on at year end, or whatever you can never quite explain when it moves, deserves its own line.
- Rename anything you wouldn’t say out loud. If the account is called something you have to translate every time you look at it, you’ll file things in the wrong one. Call it what you call it.
That’s it. Ten minutes.
What not to do
Don’t build the chart you’ll need in five years. An account you never post to is noise on every report and in every dropdown, and unused accounts are how people end up scrolling past the right one to a nearly-right one.
Don’t split by customer. That’s what customer records are for, and your chart will be unrecognizable within a year.
Don’t try to make it match last year’s spreadsheet exactly. The spreadsheet was shaped by what was easy to type, not by what you wanted to know.
The one conversation worth having
Send your accountant the chart before you post anything to it. Not after your first quarter, when the answer is “well, it’s a bit late now” and everyone agrees to live with it.
They’ll spend five minutes on it and they’ll tell you two things you wouldn’t have thought of. It’s the cheapest accounting advice you will ever get, and it’s the only part of this you can’t do alone.
After that, mostly forget about it. The books keep themselves while you work, and you are not the one holding them together.
Accounting software covers the rest of what’s underneath, and Accounting and bookkeeping in the guide is where the chart of accounts is set up, at Settings → Ledger Accounts.