Building the Right Chart of Accounts

[Christopher Freeman]

Howdy, all!

I've been lurking on the forums for a few months, and finally came across a topic that didn't seem to turn up any search results: Building a chart of accounts for a rental business.

Let me back up and start with a quick introduction: I'm Chris. I co-own a property management/REI start-up based out of Keene, NH. My business partner Alex and I met through our day jobs where we do financial analysis for a major national corporation. Most of our work revolves around budgeting and variance analysis, however we also do a lot of capital and operational modeling that draws heavily on the company's financial reporting. The modeling side of things has really been the driving force behind some early successes we've experienced, and we want to make sure that we're able to leverage our financial results to refine the accuracy of our modeling as we grow and learn.

Given our professional backgrounds, we care A LOT about the quality of our expense reporting; however, we are not accountants, and we've been struggling to determine what level of granularity we need to capture through our chart of accounts. We want to ensure that our financial statements maintain analytical value, but we don't want to make the bookkeeping so tedious that it never gets done properly.

So, now the actual question(s): 

1. How have some of the more experienced folks on here structured their chart of accounts? 

2. What works well about your chosen structure, and what are some of its limitations? 

3. To what extent do you try to capture the "root cause" of your financial results at the account level? As an example, we have considered breaking down Repairs & Maintenance into sub-categories like "Interior Surfaces" or "Plumbing" and then further breaking those down into sub-sub-categories like "Wear and Tear" vs "Damage" vs "Outside Influence."

Thanks in advance for your advice!

Chris Freeman

Parabola, LLC