Knowing how to allocate limited resources across your business's various functions is a skill that comes with experience.
Unfortunately, entrepreneurs without finance leadership frequently struggle to make suitable inter-departmental investments, mainly due to a lack of financial training and inconsistent expense record keeping. It's challenging to decide which activities need a funding boost or need to be cut when you can't establish the ROI of the investments you've already made.
This is where gini's chart of accounts mapping tool comes in. Pour in cluttered financial data, and categorised records of past investments comes out. With it, founders get a high-level view of their businesses' strengths and weaknesses and can come prepared for conversations with financiers and future investors.
gini's chart of accounts tool was partly designed to address a quirk of Xero's user interface. Since users must manually name the category associated with each expense, those categories tend to balloon over time, making even rudimentary expense analyses impossible.
Though meticulous categorisation can be good come tax time, it makes practical cross-functional performance analyses arduous and error-prone. You inevitably create a tangled web for later unravelling.
Thankfully, what would otherwise be a sizable data cleaning project can now be done in minutes. Our handy Chart of Account Mapping Template will help you quickly sort your expenses into several broader categories, giving you a more accurate and detailed view of your investments.
Those six categories are as follows:
Mapping your chart of accounts in Google Sheets is easy to get up and running. Install our Google Sheets add-on to set up automatic exports from Xero to Google Sheets. Or you can manually export your Profit & Loss report from your account software.
You'll now see your expense categories displayed under the categorisation section. Select either Sales & Marketing, General & Admin, or R&D as a mapping category for each of your expense categories (You can also apply proportional credit to multiple expense categories simultaneously).
Get access to step-by-step instructions on using the template in our help centre.
Once separated and categorised, you now have a complete historical record of all previously recorded expenses.
You'd be surprised just how much use you can get from a single spreadsheet. On top of smartly sorting critical data, using the tool shows how your company allocates resources in proportion to their benefit to the bottom line. This is crucial for first-time founders without CFOs, as it's required information for pursuing further funding, in addition to many other tough conversations.
Revisiting expenses will also show how well your allocation matches your broader strategic goals. For instance, if you've found yourself investing heavily in long-term investments like research and development, you should anticipate more distant returns than if that same investment was made in marketing and sales.
Finally, it's also worth noting that this better prepares you for financial modelling, which requires a high volume of properly taxonomised data.
Time and time again, founders find that their previous education and work experience doesn't prepare them for the myriad of challenges awaiting them. But with help from team members and solution providers, each roadblock becomes nothing more than a valuable teachable moment.
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