If you’ve been exploring the world of business accounting services, you’ve probably come across control accounts and learned about the benefits that they offer. This can leave you wondering: is it worth having control accounts for small businesses? The answer differs for each business but, in general, you can benefit from asking your accountant to create control accounts in your general ledger.
Control accounts contain summary-level information in a general ledger. They are used to display the aggregated totals of the transactions that are listed in subsidiary accounts, which contain a long list of daily, monthly, or quarterly transactions. Control accounts are often utilized to summarize accounts payable and accounts receivable, although they can also be used for other types of accounts. It’s important to note that the ending balance in control accounts should match the respective subsidiary ledger to ensure that your records are in good standing and that all of your transactions for the day have been properly recorded.
The primary purpose of having control accounts is to ensure that your general ledger isn’t too cluttered with minute details. By creating control accounts, you can keep your general ledger clean, tidy, and easy to scan while ensuring that it contains accurate balances and can provide correct information for your business’s financial statements.
However, aside from keeping your general ledger neat and clutter-free, control accounts can also provide you with a way to check the accuracy of your subsidiary accounts. Since you’ll have to check that your control accounts’ ending balances accurately reflect those in the subsidiary accounts, you can easily detect if there are any transactions that weren’t recorded. This, in turn, will help you make sure that your accounts are always in good order and prevent costly mistakes along the way.
Another benefit of having control accounts is that it can help you save time. As long as you’re confident that your control account balances, you can use them to produce management accounts reports without having to go through each subsidiary account and waiting for individual balances to be reconciled. If you’re looking for ways to have general management and financial reports without any fuss, consider asking for control accounts when signing up for professional accounting services.
A lot of companies even use control accounts to prevent fraud. Since these accounts have to be balanced with subsidiary accounts, they provide an additional barrier that fraudsters will have to overcome before they can successfully carry out their plans.
Many tax and accounting services providers recommend control accounts for large companies, which often have hundreds of daily transactions that will instantly clutter up the general ledger when recorded on it. Smaller organizations, on the other hand, generally have fewer transactions and won’t need to create subsidiary accounts that are linked to control accounts.
However, just because your business is on the smaller side doesn’t mean that you can’t benefit from having control accounts! If your business has started to boom and you find yourself dealing with more transactions per day than usual, consider asking your accountant to create control accounts and subsidiary accounts so you can easily track these transactions. This will also make it easier for you to grow your business into a mid-size or even large company since your general ledger is already ready to handle numerous transactions and you’re used to balancing control accounts and their subsidiaries.
Control accounts can be a useful tool not just for huge companies but also for small businesses. If you’d like to know more about this type of accounts, or if you’re still searching for the right accountant for your business, get in touch with Profit Solutions. We offer professional accounting and bookkeeping services and help our clients maximize their business’s potential. Contact our experts today!