Your chart of accounts is the foundation of every financial report you’ll ever produce. Set it up wrong and you’ll spend months reclassifying transactions before every board meeting, audit, or fundraise.
The Core Structure
Organize by: Revenue (by product/service line) → COGS (by delivery cost type) → Operating Expenses (by department: R&D, Sales & Marketing, G&A) → Other Income/Expenses → Balance Sheet accounts.
By Business Model
SaaS: Separate recurring vs. non-recurring revenue. Add deferred revenue accounts. Break COGS into hosting, support labor, and third-party costs. Track capitalized software development separately from R&D expense.
E-commerce: Separate product revenue by category. Break COGS into product cost, shipping, fulfillment labor, and payment processing. Add inventory and COGS accounts by product line.
Services: Revenue by service type or practice area. COGS = delivery team compensation plus subcontractors. Separate billable from non-billable labor.
Common Mistakes
- Too few accounts: everything dumped into “Professional Services” or “Other Expenses.” You lose visibility.
- Too many accounts: 500 line items that nobody reviews. You lose signal in noise.
- No departmental structure: you can’t tell if R&D or Sales is driving expense growth.
Do This Monday
- Export your chart of accounts. How many accounts do you have? If under 30, you probably need more detail. Over 200, you probably need simplification.
- Can you produce a departmental P&L from your current COA? If not, add department tags or restructure.
- Review with your accounting team — does the structure support the reports your board and investors need?
If you want help restructuring your chart of accounts, book a free consultation →