Designing a Chart of Accounts
Your chart of accounts is the spine of your financials. Get it right once and reporting becomes effortless.
Start with the financial statements you want
Don't design a COA from the bottom up. Sketch the P&L and Balance Sheet you want to read every month, then build accounts that produce it. A SaaS company's COA looks different than an agency's, and that's correct.
Numbering convention
1000s for Assets, 2000s for Liabilities, 3000s for Equity, 4000s for Revenue, 5000s for COGS, 6000s+ for Operating Expenses. Leave gaps between accounts so you can insert new ones without renumbering.
Common mistakes
Too many accounts (you'll never categorize consistently), too few accounts (you can't analyze anything), and mixing personal and business expenses (instant red flag in diligence).
Key takeaways
- Design backwards from the P&L you want to read.
- Use a consistent numbering convention with gaps.
- Aim for 30-60 accounts at seed stage, not 200.