The chart of accounts is an essential part of any SaaS startup’s accounting processes—it determines how you categorize transactions and forms the basis of key financial statements. The level of detail you establish in the chart of accounts dictates whether you can generate reports on specific expense and revenue categories or only have high-level financial data.  

However, most people outside of the finance team aren’t aware of what the chart of accounts is or how it impacts other financial processes. Let’s take a look under the hood at how a SaaS chart of accounts works.

What is a SaaS chart of accounts?

To understand what a chart of accounts is, you first need to know about general ledger accounts. Simply put, a general ledger (GL) account is a category of transactions. For example, most businesses have a GL account that groups together all their office expenses, another GL account for their payroll expenses, and so on. 

A chart of accounts (also known as a COA) is a list of all the GL accounts you use to categorize your business’s transactions. 

The design of your startup’s chart of accounts requires a balance between too much and too little detail. How much detail should be presented in the chart of accounts depends on the data needs of the business. However, it is important to remember that it is always possible to aggregate data if you require less detail; should you require more detail than you initially planned for, disaggregating data after the fact is much more difficult and incredibly time consuming. When in doubt, err in the direction of more detail than less. 

Below is a sample SaaS chart of accounts.

11100 Chase Checking Bank Checking
11200 Chase Savings Bank Checking
11400 Stripe USD Bank Checking
12100 Accounts Receivable Accounts receivable (A/R) Accounts Receivable (A/R)
14100 Prepaid Expenses Other Current Assets Other Current Assets
14200 Vendor Advances Other Current Assets Other Current Assets
14300 Loans Receivable Other Current Assets Loans To Officers
15100 Computer & Office Equipment Fixed Assets Fixed Asset Computers
15200 Furniture & Fixtures Fixed Assets Fixed Asset Furniture
15400 Leased Computer Equipment Fixed Assets Leasehold Improvements
16100 Accumulated Depreciation - Computers Fixed Assets Accumulated Depreciation
16200 Accumulated Depreciation - Furniture Fixed Assets Accumulated Depreciation
16400 Accumulated Depreciation - Leased Computer Equipment Fixed Assets Accumulated Depreciation
17100 Intangible Asset - Domain Fixed Assets Intangible Assets
18100 Accumulated amortization Fixed Assets Accumulated Amortization
19100 Security Deposits Other Assets Security Deposits
21100 Accounts Payable Accounts Payable (A/P) Accounts Payable (A/P)
21200 Credit Card Credit Card Credit Card
22100 Other Liabilities Other Current Liabilities Payroll Clearing
22300 Accrued Expenses Other Current Liabilities Other Current Liabilities
22350 Accrued Legal Expenses Other Current Liabilities Other Current Liabilities
22800 Deferred Revenue Other Current Liabilities Other Current Liabilities
24100 Capitalized Lease STL Other Current Liabilities Loan Payable
28110 Loan Other Current Liabilities Loan Payable
28200 Capitalized Lease LTL Long Term Liabilities Other Long Term Liabilities
31100 Class A Common Stock Equity Common Stock
31150 Class B Common Stock Equity Common Stock
31200 Preferred Stock - Series Seed-1 Equity Preferred Stock
31220 Preferred Stock - Series A Equity Preferred Stock
31230 Issuance Cost Equity Preferred Stock
32100 Retained Earnings Equity Retained Earnings
41100 Sales Income Sales of Product Income
41110 Activation Fee Sales Income Sales of Product Income
41120 Flat Rate Pilot Sales Income Sales of Product Income
41150 Monthly Minimum Commitment Sales Income Sales of Product Income
41170 Monthly Minimum Commitment Rebates Income Sales of Product Income
41200 Billable Expense Income Income Sales of Product Income
41300 Sales of Product Income Income Sales of Product Income
49998 Unapplied Cash Payment Income Income Unapplied Cash Payment Income
51100 Cost of Goods Sold Cost of Goods Sold Cost of labor - COS
51300 COS - Hosting/Server Cost Cost of Goods Sold Cost of labor - COS
51310 Referral Fees Cost of Goods Sold Other Costs of Services - COS
51400 Cost of Goods Sold-1 Cost of Goods Sold Supplies & Materials - COGS
61101 Salaries Expenses Payroll Expenses
61104 Contractors Expenses Payroll Expenses
61105 Executive Contractors Expenses Payroll Expenses
61110 Bonus Expenses Payroll Expenses
61200 Executive Expenses Payroll Expenses
61200 Marketing Expenses Payroll Expenses
61200 Payroll Tax Expense Expenses Payroll Expenses
61400 Health Care Expense Expenses Payroll Expenses
61410 Worker's Compensation Expenses Payroll Expenses
61500 Office Meals/Food Expenses Entertainment Meals
62200 Airlines & Transportation Expenses Travel
62300 Travel Lodging Expenses Travel
64100 Office Expenses Expenses Office/General Administrative Expenses
64105 Equipment < $2,500 Expenses Office/General Administrative Expenses
64150 Software Subscription Expenses Office/General Administrative Expenses
64200 Dues & Subscriptions Expenses Office/General Administrative Expenses
64250 Business License & Fees Expenses Office/General Administrative Expenses
64400 Bank Service Charges Expenses Bank Charges
64500 Postage and Shipping Expenses Shipping, Freight & Delivery
64550 Bad Debts Expenses Bad Debts
65100 Advertising Expenses Advertising/Promotional
65150 Marketing / Website Expenses Advertising/Promotional
65200 Marketing Contractors Expenses Advertising/Promotional
65250 Sales Contractor Expenses Advertising/Promotional
65800 Client Meals & Entertainment Expenses Promotional Meals
66500 Charitable Contributions Expenses Charitable Contributions
67120 Research & Testing Expenses Other Business Expenses
67125 Research & Testing - Acquisition Expenses Other Business Expenses
67130 Research & Testing - Management Expenses Other Business Expenses
67450 Development Tools Expenses Office/General Administrative Expenses
68100 Professional Fees Expenses Legal & Professional Fees
68110 Accounting Fees Expenses Legal & Professional Fees
68200 Recruitment Expense Expenses Legal & Professional Fees
68300 Legal Services Expenses Legal & Professional Fees
69100 Rent Expenses Rent or Lease of Buildings
69200 Insurance Expenses Insurance
69300 Telecom Expenses Utilities
69301 Utilities Expenses Utilities
69500 Repairs and Maintenance Expenses Repair & Maintenance
69900 Depreciation Expenses Other Business Expenses
71100 Interest Income Other Income Interest Earned
71150 Interest Income - Related Party Other Income Other Miscellaneous Income
71200 Other Income Other Income Other Miscellaneous Income
69950 Amortization Other Expense Amortization
71300 Foreign Exchange Gain / Loss Other Expense Exchange Gain or Loss
72100 Interest Expense Other Expense Other Miscellaneous Expense
81100 Corporate Taxes Other Expense Other Miscellaneous Expense

It’s important to note that every business’s chart of accounts will look different. For example, because SaaS businesses gradually recognize subscription revenue over the course of customer contracts, a SaaS company chart of accounts will include a GL account for deferred revenue as a liability. For other industries, this account may not be necessary. 

3 Key Elements Of A SaaS Chart Of Accounts

1. Account Names 

The name of each GL account describes the transactions that it groups together. You should choose account names that make sense for your business model and are instantly understandable for your finance team. For example, in the sample chart of accounts above, there are eight GL accounts that the business uses to categorize various types of fixed assets:

  • Computer & Office Equipment
  • Furniture & Fixtures
  • Leased Computer Equipment
  • Accumulated Depreciation - Computers
  • Accumulated Depreciation - Furniture
  • Accumulated Depreciation - Leased Computer Equipment
  • Intangible Asset - Domain
  • Accumulated amortization

For more guidance on managing startup expenses, see: 4 Tips To Optimize Expense Management For Startups

2. Account Types

The COA groups the GL accounts into broad categories known as account types. The account types will be similar for most businesses because they correspond with the key sections in the income statement (also known as the profit and loss statement or P&L) and the balance sheet. Some businesses choose to use more detailed categories, but there are five basic account types: 

  • Assets—Used in the balance sheet.
  • Liabilities—Used in the balance sheet.
  • Equity—Used in the balance sheet.
  • Revenue—Used in the income statement.
  • Expenses—Used in the income statement.

Based on the account type listed in the chart of accounts, software such as QuickBooks will automatically pull the data for each GL account to the relevant section in the financial statements. For example, the eight GL accounts listed in the previous section are grouped into the account type ‘Fixed Assets’. This tells your accounting software to use the data from these accounts in the assets section of the balance sheet. 

3. Account Numbers

Each GL account is assigned a unique number that allows you to code transactions to the right account. Most SaaS charts of accounts have account numbers between four and seven digits. Using more digits gives you space to add accounts in the future, so if you’re expecting to grow, use at least five digits in your account numbering system. 

The first digit in the account number indicates the financial statement and section to which it corresponds. For example:

Financial Statement Financial Statement Section Account Number
Balance sheet Assets 10000-19999
Balance sheet Liabilities 20000-29999
Balance sheet Equity 30000-39999
Income statement Revenue 40000-49999
Income statement Cost of Sales 50000-59999
Income Statement Operating Expenses 60000-69999
Income Statement Other Income 71000-712999
Income Statement Other Expenses 7200-72999
Income Statement Tax Expenses 81000-81999

Your income statement and balance sheet are generated using the information in the chart of accounts and may include the account name, account type, and type detail. For example, the following income statement is generated from the sample chart of accounts shown earlier in this article.

P&L COA Example

Looking for help building your chart of accounts? 

At Zeni, our team of experts has years of experience helping SaaS startups build a financial foundation that supports their growth—including creating and managing the startup chart of accounts. Zeni is a modern, full-service finance firm that provides SaaS startups with outsourced bookkeeping, accounting, and CFO solutions to handle everything from startup budgeting to financial modeling. Zeni’s accountants will help you decide on the level of detail, design a GAAP-compliant chart of accounts, and set it up in your accounting software, so you have everything you need to generate financial reports.

Ready to get professional support with your SaaS accounting setup? Click here to book a call with Zeni.