Categorizing Chart of Accounts
How to get to Chart of Accounts:
Click the Data Entry Tab along the left-hand side of your screen, then select Chart of Accounts across the top.
Categorizing Fixed or Variable Expenses:
Fixed Expenses are pretty easy: they're expenses that don't really vary with the amount of revenue coming in. For example, office leases or insurance costs.
Variable Expenses can be a little more tricky. ProfitSee is interested in any expenses you have which vary with your Revenue. For example:
- Marketing is a Variable Expense for two reasons. First, you tend to make more revenue after you market. Second, many businesses tend to spend less on marketing when times are tight.
- All Cost of Goods Sold accounts are Variable Expenses. The more products your company is selling, the more you will be spending on Cost of Goods Sold Expenses.
- Sales Commissions are Variable Expenses because they are related to the Revenue.
Many small business owners place non-business expenses into their corporation for tax benefits. If done proper CPA advisement this is legal and acceptable, but it can cloud the true story of the business' results.
We recommend you categorize anything that is really more for the owner's personal benefit as Owner Compensation. Doing this will ensure you get the best results from ProfitSee's analytic tools.
Things that are typically Owner Compensation:
- The owner's salary
- The owner's car payments and insurance
- Country club memberships
- Board meetings in exotic locales
ProfitSee automatically converted all of your Other Income accounts to Revenue accounts. Your Other Expense accounts were converted to Fixed Expense accounts.