A better chart of accounts

Originally published in OVMA Focus Magazine March/April 2025

BY GREG TONER AND EMILY STEEVES

One of my friends, Peter, is an engineer, and he’s very detailed-oriented. Recently, he was shopping for a new car and put together one of the largest spreadsheets that I’ve ever seen. He used it to compare all the crossover SUVs that he and his wife were considering, evaluating more than 50 different factors for each car. It was impressive, but it was also easy to feel overwhelmed when looking at it, and it was hard for anyone but him to understand.

Peter’s spreadsheet is a little like a profit and loss statement assembled using the AAHA/VMG Chart of Accounts. Just as Peter’s spreadsheet has an overwhelming number of rows, the AAHA/VMG Chart of Accounts has an overwhelming (and arguably unnecessary) number of accounts, and an excessive level of granularity. While the chart is intended to cover a wide array of transactions and financial categories, the reality is that many veterinary practices find it unnecessarily complicated, creating confusion and inefficiencies in day-to-day financial management.

With so many accounts, consistency both within a practice and across practices is challenging, as revenue types may not be consistently categorized, making monthover-month and year-over-year comparisons difficult.

Overwhelming number of accounts

One of the most significant issues with the AAHA/VMG Chart of Accounts is the sheer number of accounts it contains. At first glance, the chart seems comprehensive and well organized, but when it’s put into practice, the number of categories can be overwhelming. For a typical veterinary practice, navigating many accounts can be cumbersome and time-consuming, as it forces business owners, bookkeepers and accountants to deal with excessive subcategories for relatively simple transactions.

While it’s useful to track major categories of expenses, the extreme level of granularity isn’t necessary for all practices. A small practice will find it more effective to group related expenses into broader categories without the need to separately account for every individual item. This high level of detail leads to increased administrative work, especially when some of these subcategories may only involve a handful of transactions over the course of a year (or none for the average practice in Ontario: How many have an MRI on site?). Additionally, the AHHA/VMG Chart of Accounts doesn’t mirror the system for categorization that the main veterinary supply distribution providers use, further creating additional administrative processes required to reflect the granularity in the AHHA/VMG Chart of Accounts.

Categories such as labour costs often demand intricate breakdowns of different types of staff compensation into 19 different accounts for compensation and five different categories for employee benefits. While these distinctions may be useful for larger practices with numerous employees, smaller practices may find that tracking every aspect of labour costs in such detail is excessive.

Instead, a more streamlined system could give practice owners the flexibility to track major categories without becoming bogged down by excessive detail that doesn’t add significant value to the overall financial picture.

Consistent classification is a challenge and leads to poor quality data for analysis and decision making.

Increased risk of error and inaccuracy

The high level of detail in the AAHA/VMG Chart of Accounts, while theoretically meant to provide a thorough financial picture, can increase the risk of errors and inaccuracies in bookkeeping. When there are so many accounts to manage, it becomes easier for mistakes to happen and expenses to be applied to the wrong accounts, especially if staff members aren’t trained to categorize each transaction correctly. Furthermore, the time spent maintaining many accounts diverts attention from more strategic financial management tasks.

For instance, a bookkeeper might inadvertently record a supply purchase under the wrong subaccount or forget to parse out the different segments of an expense, especially if they’re dealing with hundreds of accounts in the chart. As the number of accounts increases, so does the complexity of maintaining and reconciling them. This administrative overhead can be a significant drain on resources, particularly for smaller practices that cannot afford to dedicate substantial time or personnel to bookkeeping. For practices using third-party bookkeeping and accounting, the substantial level of additional adjustments, and admin time required to comply with the AHHA/VMG Chart of Accounts results in higher bookkeeping and accounting costs.

Inefficiencies in financial reporting

Why do practices maintain accounting records? The base use is to support sales tax and income tax filings. These two filings need very little detail and generally result in many of the AAHA/VMG accounts being rolled up to fit into the limited fields for reporting income and expenses. Even the simplest chart of accounts will support sales tax and income tax filings for Canadian practices.

The second major reason a practice maintains accounting records is to track and optimize performance. Tracking and optimizing performance can take various forms based on a practice’s lifecycle, but at any stage, a practice needs consistently categorized expenses and timely information.

The number of accounts in the AAHA/VMG Chart of Accounts makes bookkeeping a more time-consuming process and increases the risk of incorrect or inconsistent account classification. It doesn’t work for most owner-managed veterinary practices, as it forces them to dedicate more resources to bookkeeping that could be diverted elsewhere to help grow their practice. Even with those additional resources, it increases the risk that the records produced aren’t necessarily comparable to last month’s or last year’s.

These issues are what led to the development of the OVMA/ VetCPA Chart of Accounts, which balances detail and unnecessary complexity and is suitable for a privately owned practice. The goal is to build a system that allows practices to generate monthly accounting records quickly and efficiently, with limited chances for inconsistencies month-overmonth or year-over-year, so the records can be reliably used to highlight opportunities and threats in a practice so they can be managed appropriately.

A limited chart of accounts also increases the reliability of industry-wide reporting, such as the OVMA Economic Survey. Peter’s spreadsheet was useful for him, but the funny thing was that all the crossover SUVs he was considering had roughly the same warranty, horsepower, cargo volume, seating space, features and reviews, and were priced within $5,000 of each other. He ended up picking a model with a dealership that was closest to his home. Through the process, he got caught up in the overwhelming amount of details, and it wasn’t until the last minute that he realized the most important factor for him, assuming the other factors were relatively even, was that the dealership was close by for services.

You can find the OVMA/VetCPA chart of accounts HERE.

Greg Toner, CPA, CA, TEP, CLU, is principal at VetCPA.

Emily Steeves is the bookkeeping manager at VetCPA.

Reprinted from the Ontario Veterinary Medical Association’s Focus magazine www.ovma.org