5 Signs Your Business Has Outgrown Its Chart of Accounts (and How to Fix It)

“Is your chart of accounts making your financial reporting more complicated than it should be?”.

Many growing businesses start with a COA that seemed perfect at launch, but as transactions, departments, and revenue streams multiply, that once-helpful structure can become a bottleneck. Confusing account labels, inconsistent reporting, and manual workarounds often signal that it’s time for an upgrade.

If you’re noticing these headaches in your own operations, this article will help you identify the warning signs that your chart of accounts has outgrown its current setup and show you how to reorganize it to support accurate reporting, smoother operations, and sustainable growth.

What is the Chart of Accounts (COA) Restructuring?

COA restructuring involves redesigning the numbering system, account categorization, and reporting hierarchy within a company’s general ledger. Accountants undertake this process to eliminate redundancies, enhance accuracy, and enable scalable, reliable financial reporting. 

Chart of accounts restructuring includes: 

• Re-coding and Renumbering - Reassigning account numbers into a logical sequence (e.g., Assets = 1000–1999, Liabilities = 2000–2999).

• Reclassification - Moving items into the right buckets (e.g., shifting certain operating expenses into COGS to reflect true gross margins).

• Consolidation - Merging redundant or low-activity accounts (e.g., combining “Office Supplies” and “Stationery” into one).

• Segmentation - Designing the COA to accommodate multiple reporting cuts, by department, business unit, product line, or geography, usually by adding dimensions, cost centers, or sub-accounts instead of multiplying GL accounts.

• Standardization - Aligning with industry standards or regulatory frameworks (e.g., IFRS/GAAP categories, tax reporting requirements) to allow external reporting easier and less error-prone.

5 Signs Your Business Need Chart of Accounts Restructuring

Here are the five key warning signs that indicate your business’s chart of accounts may need a strategic restructuring.

1. Too Many Accounts and Low-Activity Accounts

A classic warning sign is an oversized COA cluttered with redundant accounts. For instance, APQC’s CFO, Perry Wiggins, discovered that his company had over 5,000 accounts, far above the 75th percentile, because teams kept adding accounts on an ad hoc basis. He notes that “a COA with too many accounts can create headaches,” as it increases review time, reconciliations, system maintenance, and the risk of coding errors.

Accounting author Steven Bragg similarly cautions that “the typical chart of accounts is too large,” and that an overly large COA can lead to incorrect account postings, immaterial balances, extensive training needs, and higher audit costs.

In practice, if your COA contains thousands of seldom-used general ledger (GL) accounts, especially many with near-zero balances, it is a strong indication that the chart needs pruning. 

2. Inflexible or Slow Reporting and Close Processes

Delayed reporting is a key indicator of an overly complex or disorganized COA, as it makes management reporting cumbersome and inefficient.

ACBM Solutions notes that finance leaders often encounter situations where “executives ask for specific reports… and you can’t get them what they need,” or receive conflicting answers due to inconsistent account definitions. If generating standard reports requires extensive IT intervention, weekend work, or if month-end close stretches over a week or more, the COA is likely the culprit.

Perry Wiggins adds that an excessively large COA significantly extended APQC’s close and audit cycles, to the point that preparing for an audit became “a nuisance.” In short, an outdated COA “defies your efforts to slice and dice data effectively,” forcing analysts to spend more time compiling data than making meaningful decisions.

3. Confusing, Redundant, or Misaligned Account Structure

Ambiguous or duplicated accounts are clear warning signs. For example, using acronyms or vague titles, such as “Office Exp.” versus “Office Supplies” can confuse anyone reviewing the reports.

BudgetEase highlights that duplicate or overlapping accounts (like “Office Expenses” and “Office Supplies”) unnecessarily complicate the COA. Similarly, JMT Consulting cautions that “excessive detail”, many small accounts with balances under $1,000 and “misaligned categories” (e.g., revenue by product but COGS by department) undermine the ability to analyze results effectively.

In practice, if accountants frequently create new GL accounts just to capture small expenses, or if revenue and cost accounts don’t align, making it impossible to calculate gross margins by product, these are clear indicators that the COA no longer reflects how the business operates.

4. Reliance on Manual Workarounds

An inadequate COA often forces teams to rely on manual workarounds. Typical indicators include frequent reclassifications in Excel, using ad-hoc spreadsheets as temporary ‘systems of record,’ or heavy reliance on classes and tags to track items missing from the COA.

As one consultant notes, if staff spend more time manually “collecting and compiling data” than analyzing it, the COA is likely at fault. Similarly, CFO Bridge points out that if the finance team repeatedly re-codes entries, such as logging the same expense under “Marketing” one time and “Operations” another, it erodes confidence in the reports.

In short, heavy manual intervention, Excel workarounds, frequent journal corrections, or placeholder entries like “Ask My Accountant”, is a clear signal that the chart of accounts is broken.

5. Growth Strain

A healthy COA should be flexible enough to accommodate new products, regions, or lines of business. If expanding into a new market, adding a department, or acquiring a company “makes you uneasy,” it’s a sign that your COA may be too brittle.

ACBM warns that a COA that barely handles current complexity will likely collapse under growth, for example, adding a new product could necessitate creating entirely new account hierarchies. Deloitte notes that companies often end up with “unwieldy” charts after repeatedly adding accounts for new products or locations; the recommended solution is to streamline back to a minimal set capable of scaling with the business.

If you struggle to consolidate multi-entity financials or roll up results because each division maintains its own messy COA, it’s a clear indicator that a redesign is necessary.

How to Fix an Outgrown Chart of Accounts

As experienced CFOs, we’ve worked with businesses facing exactly this challenge, helping them systematically redesign their COAs to restore clarity, efficiency, and scalability. Even businesses on the brink of reporting chaos have regained control with a structured approach. Our guidance is consistent and actionable:

1. Audit and define objectives first – understand current inefficiencies and future reporting needs.

2. Trim and consolidate accounts – remove redundancies and merge low-activity accounts.

3. Standardize naming and structure – create a logical numbering system and clear account titles.

4. Use dimensions or tags for details – track departments, projects, or products without inflating the GL.

5. Manually build the revised COA – don’t rely on auto-populated templates; map accounts carefully.

6. Archive rather than delete historical accounts – preserve past data for audits while keeping the active COA clean.

7. Establish governance and processes – control how accounts are added or changed to prevent future sprawl.

8. Regularly review and prune – make COA maintenance an ongoing part of your finance operations.

If your business is currently struggling with an overgrown COA, our fractional CFOs at CFO Bridge can guide the entire restructuring process, from auditing your existing chart to implementing a scalable system that supports growth, accurate reporting, and efficient decision-making. 

With hands-on experience across diverse industries, we help businesses turn a chaotic COA into a structured engine for insights, not headaches.