Simplifying your Chart of Accounts in NetSuite

By - October 28, 2016

If there is one thing an accountant holds dearly to their heart, it is their chart of accounts.  Believe me, I have been there.  As a CPA, I know what it’s like to be able to rattle off the exact transaction that hit any 5-10 digit code that you can throw at me.  However, what if I told you that you could shrink your chart of accounts to less than half its size and not only keep your current reporting capabilities, but dramatically increase your reporting potential for the future?

I am here to tell you that it’s possible to ditch the classic chart of accounts and generate one that creates flexibility in reporting, not only for the accounting and finance department, but for all of the stakeholders in your organization.  After all, accounting also used to be done with an abacus, didn’t it?


NetSuite has 3 standard segments that can be used to deconstruct your chart of accounts: Department, Class, and Location.  If you have a One World account, you can also think of Subsidiary as a fourth segment.

By tagging these segments on various transactions in NetSuite, the reporting capabilities that can be achieved by your company can be almost limitless.  No longer will you be restricted to tracking, revenues, expenses, receivables, payables, etc. by being handcuffed to your chart of accounts.  These segments can be used to filter report rows and columns as well as to mine specific data using NetSuite saved searches.

Below I will describe each segment and give tips and tricks as well as best practices I have observed in my time as a NetSuite consultant.


Department is typically the easiest segment to grasp for new NetSuite users.  This segment is normally tagged on expense transactions and is primarily used for tracking departmental budgets.

The best example to show how this can be used to shrink your chart of accounts is on salaries expense.  Imagine your old chart of accounts:

58000-01 Salaries Expense – Accounting

58000-02 Salaries Expense – Sales

58000-03 Salaries Expense – Marketing

58000-04 Salaries Expense – Admin

58000-05 Salaries Expense – Human Resources

58000-06 Salaries Expense – Accounting

This is SIX accounts to report on ONE expense.  Now take a minute to think about it, does that even makes sense?  Especially with all of the expenses on your trial balance that can cross departments!  Now look at your new chart of accounts:

58000 Salaries Expense

That’s it!  I just saved you five accounts and having to create six new account each time you add a new type of expense to your organization.  By tagging the department on the transaction that uses the account 58000 above, you are virtually creating the same account strings used in your current chart of accounts without having to use a separate account.


Now that we have departments covered, let’s take a look at class.  Class is typically the segment that new NetSuite users take the most time to distinguish.  This segment is best used as a way to report on the different profit centers, business units, or product lines that your company has.  The highest level way to think of class is: What portions of my business would I like to see a separate P&L statement for?

For example, you have a sporting goods company and your board of directors likes to look at how profitable the different sports categories are.  Once again, imagine your old chart of accounts:

40000-01 Golf Revenue

40000-02 Tennis Revenue

40000-03 Baseball Revenue

40000-04 Basketball Revenue

40000-05 Football Revenue

40000-06 Lacrosse Revenue

50000-01 Golf Direct Expense One

50000-02 Tennis Direct Expense One

50000-03 Baseball Direct Expense One

50000-04 Basketball Direct Expense One

50000-05 Football Direct Expense One

50000-06 Lacrosse Direct Expense One

51000-01 Golf Direct Expense Two

51000-01 Tennis Direct Expense Two

51000-01 Baseball Direct Expense Two

51000-01 Basketball Direct Expense Two

51000-01 Football Direct Expense Two

51000-01 Lacrosse Direct Expense Two

Here we are using eighteen accounts to report on one revenue and two expenses.  Now let’s look at our new chart of accounts:

40000 – Revenue

50000 – Direct Expense One

51000 – Direct Expense Two

Here we go again, I just saved you 15 more accounts.  I am on a roll!


As with departments, locations are typically very easy to understand.  If your company has multiple locations, this is what the segment should be used for.  This does not necessarily mean the locations your company is physically located in (although it could!).  This can be used for places you store inventory in or do business in.

From the examples already given in my Department and Class examples above, you can probably already guess how your current Chart of Accounts would change.  However, I would like to give you some warnings on this segment:

  1. If your company has inventory or even has the slightest possibility of having inventory in the future, save this segment for it. This will be used by NetSuite’s multi-location inventory feature.
  2. DO NOT USE location to define your subsidiaries. I know this sounds very tempting, but can create big headaches in the future.  Just ask anyone who has spun off a subsidiary and now has useless data floating around in their NetSuite account, or even worse, has gone through the process of defining a subsidiary as a location and has learned you can only report in the base currency of the parent company.


The best practices and tips and tricks I have provided above are just that: best practices and tips and tricks.  These segments can be used to restructure your companies reporting in any which way you please.   Think of these segments as NetSuite creating your old chart of accounts string each time a transaction occurs and without the headache of your NetSuite users having to remember the account number for each transaction that will hit a department, class, location or a combination of the three.

RSM is the #1 solution provider of ERP and CRM systems for the middle-market. RSM helps companies evaluate, select and implement the best ERP solutions available and was recently recognized as the 2016 worldwide solution provider of the year by NetSuite. To contact RSM with questions related to this post or any others related to NetSuite, please can reach out via email at or by phone at 855.437.7202     .

By: Greg Cole – Pennsylvania NetSuite Solution Provider

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