6 tips for optimizing your chart of accounts

A chart of accounts (COA) is a structured listing of all accounts used to record financial transactions in an organization's general ledger. It serves as the foundation for organizing financial data and generating meaningful reports.

Your chart of accounts directly impacts your ability to track, analyze, and report financial data effectively. Whether you're looking to refine an existing system or build one from the ground up, these recommendations will steer you toward a streamlined, functional, and insightful COA.

1. Keep it simple

Use only the accounts you need. Reducing the quantity of categories will make it easier to code, read, and audit. Accounts that don’t get used often, or that have relatively small transactions should perhaps be combined into another account. On the balance sheet, support the balances with underlying schedules rather than create separate accounts for similar transactions. On the P&L, use multidimensionality rather than duplicating accounts (see section 6).

Here are a few questions to ask to help keep things simple:

• What information is required for internal reporting (management, department reports, etc.)
• What information is required for external reporting? (taxes, audits, compliance, etc.)
• Will this account get used enough to be worth it?
• Is the account naming clear enough that non-accountants will understand?
• Can we reduce some accounts by maintaining separate supporting details?

2. Use account numbering

Using account numbers keeps order and helps identify what type of account it is. Unless account numbers are used, the system defaults to alphabetical order which may not produce the most relevant information on top. Also, the account numbering system helps identify account types: assets, liabilities, equity, sales, cost of sales, expenses, and other expenses.

10000 - Current Assets

20000 - Long-Term Assets

30000 - Current Liabilities

40000 - Long-Term Liabilities

50000 - Equity

60000 - Revenue

70000 - Cost of Sales

80000 - SG&A Expenses

90000 - Other Income/Expense

Give yourself space when starting so you can add more accounts later on and still keep the order you would like.

3. Use sub-accounts

Grouping like-kind accounts into sub-categories and ordering the accounts from largest to smallest (the best you can) produce more relevant information.

81100 - Advertising & Marketing

• 81105 - Ad Spend $500,000
• 81110 - Public Relations $175,000
• 81115 - Content Creation $125,000
• 81120 - Affiliate Payments $75,000

Total 81100 - Advertising & Marketing $875,000

4. Align with reporting requirements

When the COA is aligned with reporting needs, it is easier to obtain relevant information. Consider what is important for internal reporting (management reports, forecasts) and external reporting (banking, tax). As much as is helpful, separate fixed expenses from variable expenses. Consider what separations in revenue may be most helpful to include on the GL (channel, product, geography, customer).

5. Keep coding consistent

Choose a code and stick with it. There are many instances where a transaction could be appropriately coded to multiple codes. Pick one, and continue coding it there. This will help with account analysis, forecasting that account, and comparing the forecast to actuals.

6. Use multidimensionality

Multidimensionality refers to the levels of data collected in each transaction. It can reduce the number of accounts while maintaining the ability to see data however desired. Examples of multidimensional data include product, quantity, location, customer, vendor, department, sales and cost per unit, project, event, and so on.

It’s common to see a COA that duplicates codes for departmental reporting. This increases the likelihood of coding errors and requires the financial user to add up account values to understand the full cost of an account type. Instead, using Class Categories (QBO or Tracking Categories (Xero) can provide departmental reporting without complicating the COA.

The common thread among each of the steps listed is simplicity. As companies grow, the COA may experience changes. These best practices will help maintain simplicity along the way and will produce valuable results.

Standardize your chart of accounts with AI that learns and enforces your coding rules

A messy chart of accounts creates chaos across your entire finance operation. When transactions land in the wrong accounts or coding is inconsistent, you waste hours reconciling, correcting errors, and explaining variances to auditors. Ramp's AI-powered accounting software eliminates these headaches by learning your chart of accounts structure and applying it consistently across every transaction.

Ramp's AI analyzes your historical coding patterns and automatically maps transactions to the correct accounts, departments, classes, and custom fields in your ERP. When you make corrections or adjustments, Ramp learns from your feedback and applies those rules forward, so coding accuracy improves over time. You get 67% more zero-touch codings compared to rules-only automation, which means fewer transactions stuck in review and more time for strategic work.

Here's how Ramp keeps your chart of accounts clean and consistent:

• AI learns your structure: Ramp studies how you've coded similar transactions and applies those patterns automatically across all required fields
• Enforce coding standards: Set required fields and validation rules so transactions can't sync until they meet your standards
• Catch errors before sync: Ramp flags transactions that don't match your chart of accounts structure, so you can fix issues before they hit your ERP
• Maintain consistency: Every transaction follows the same coding logic, whether it's a $10 lunch or a $10,000 software subscription

Try a demo to see how Ramp standardizes your chart of accounts and saves 40+ hours every month.