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The foundation of easy to read financial reports, and an easy to use bookkeeping software is nailing your chart of accounts. It might sound a bit intimidating, but I promise it’s not as complicated as it seems.

Be sure to read all the way to the end, because there is a free download to help give you a head start with setting this up for your boutique business!

What is a Chart of Accounts?

Think of it as a list that is used to organize and group together all your financial activity. This list is grouped into six sections.

Every single transaction will fall into one of these buckets. The six main categories: Assets, Liabilities, Equity, Income, Cost of Goods Sold, and Expenses. We’ll explore each of these in greater detail below.

Assets

Assets are the things your boutique owns. This often includes:

• Checking Account Balances
• Savings Account Balances
• Cash on Hand
• Undeposited Shopify Payments (and any other payment processor funds they’ve collected, but not yet deposited into your bank account.)
• Inventory
• Buildings
• Equipment
• Shelving & Display Materials
• Furniture

Most of the time assets are things you can physically hold. They are THINGS that have a monetary value. But they can also include INTANGIBLE things like trademarks or patents.

Keeping track of your assets is important because it shows what your boutique is worth.

Liabilities

Liabilities, on the other hand, represent what your boutique owes. This may include:

• credit card balances
• loans or lines of credit
• sales tax you’ve collected from your customers and still need to pay to the state(s)
• balance on a large purchase that you financed through the vendor

If your business owes money to someone, it should be reflected as a liability in your bookkeeping records.

Equity

In simple terms, your equity is the “cash out” value of your business. If you were to take all your assets, and use them to pay off all your liabilities, your equity is what’s left over, or what you’d walk away with.

It represents the owner’s stake, or investment, in the business. Any time you put your personal money into the business, your equity increases. Any time you withdraw money for personal use, it decreases your equity.

Common accounts in the equity section include:

• Owner’s Contribution
• Owner’s Draws
• Retained Earnings

Income

Now, let’s talk about the good stuff – income! Income is the money flowing into your boutique from your sales, but it can be more detailed that that.

Common accounts under this section include:

• Gross Product Sales
• Discounts
• Returns
• Gift Card Sales

One of the best things about bookkeeping, is it can be as general or detailed as you want. One of the best and most helpful ways you can make it more detailed is to separate out your “Gross Product Sales” into the different divisions or departments of your store. It could instead look like:

• Clothing Sales
• Accessories Sales
• Decor & Gift Sales

Or even more specific:

• Tops Sales
• Bottoms Sales
• Outerwear Sales
• And so on…

You get the point. Your financial statements should tell a story of where your money is coming from and where it’s going to. You have the ability to say how detailed that story is. Just don’t get too carried away – if you REALLY want detailed sales numbers, it’s often better to analyze your sales from your point of sale system.

Cost of Goods Sold

While your cost of goods sold, or COGS, is technically an expense, it’s super important to keep your inventory costs separate from your everyday operating expenses so you can get an accurate view of your profit margins.

It’s important to remember that when you purchase your inventory, that inventory is an asset. It becomes a COGS expense when you sell it.

If you choose to break out your gross sales into different categories under your Income section, I highly recommend you use those same categories in your COGS section. So it could look like:

• Tops COGS
• Bottoms COGS
• Outerwear COGS
• and so on…

This allows you to accurately compare the profit margin of each division/department in your store to see what is the most profitable area in your business.

Sure, you can probably review all of this information directly in your POS system (or at least you should be able to – if not, it might be a good time to upgrade systems). But, it can be super helpful having all of this financial info in one place.

Another one of the best things about bookkeeping is that nothing is set in stone. If you’re just getting the hang of bookkeeping, start simple. Just use “gross product sales” and “COGS” and group everything together. Once you feel confident in your ability, you can always start detailing things out later.

Expenses

These are the everyday expenses that keep your boutique running, and this will likely be your largest section in your chart of accounts. Having a detailed & industry specific expense section helps you see where your money is going and where you can make smart financial decisions.

Common expense accounts include:

• Advertising & Marketing
• Bank Service Fees
• Event Expenses
• Office & Store Supplies
• Meals Expenses
• Merchant Service Fees
• Rent Expense
• Software & Apps
• Payroll Expenses
• Travel Expenses
• Utilities

Again, this list can be as detailed or generic as you want. If you want subcategories under Advertising for “Facebook Ads” and “Print Ads” – do it! Think about the information that would be helpful for you to see, and make those changes.

A custom chart of accounts for retail boutiques!

If you’re ready to take the plunge and want a head start on setting up your Chart of Accounts, I’ve got a free download just for you.

It’s a boutique-specific Chart of Accounts template, custom-tailored to make your bookkeeping journey a breeze. You can grab it right here!

If you’re setting up a brand new Quickbooks Online account, you can actually import this right into your QBO account. Just delete the chart of accounts that’s automatically created for you before you start using it (seriously, nobody needs the 200+ categories they automatically create for you) and start fresh with this one!

If you’re already using QBO (or any other bookkeeping software) you can still edit it to fit this template.

Setting up a clean & simple Chart of Accounts is an important part of having a clear & easy to use bookkeeping system. It’s not just about numbers; it’s about understanding your boutique’s financial health and making informed decisions that help you become even more profitable.

Remember, you’ve got this! If you want some additional hand holding to setup an easy to use bookkeeping system, then I wanna invite you to checkout Bookkeeping Made Simple for Boutiques where I will walkthrough the entire QBO setup for you, and train you on exactly what you need to be doing to maintain it going forward.

We cover everything from purchasing the subscription & importing a custom chart of accounts, to reading & UNDERSTANDING the financial statements that you’ll be creating.

To learn more about if this course is right for you, check out Bookkeeping Made Simple for Boutiques.