How to Set Up a Chart of Accounts for a SaaS Company

A chart of accounts is the numbered list of accounts a company posts every transaction to: assets, liabilities, equity, revenue and expenses. A SaaS company’s should be short and keyed twice: a natural account for what each cost bought and a department for who bought it. Gross margin, CAC and the GAAP statements then come from the same rows.

The department key is the one most ledgers lack, and large companies have described the price of adding it late. When the Financial Accounting Standards Board (FASB) weighed making companies break each functional expense line down by nature, preparers said “their reporting systems are not configured to disaggregate functional expenses by nature” and called the idea prohibitively costly (FASB, ASU 2024-03, BC60). A startup choosing its ledger this year makes the same design decision for the price of one field per journal line.

A SaaS chart of accounts: few accounts, two keys, and the rule behind each block

Block	Accounts (examples)	Second key	Rule that shapes it	What it feeds
1000s Assets	Cash; accounts receivable; contract assets; capitalised commissions; capitalised software (in progress, in service)	Project, for capitalised software	ASC 606; ASC 340-40; ASC 350-40	Cash, collections, the reconciliation of gross spend to GAAP expense
2000s Liabilities	Accounts payable; accrued payroll and commissions; deferred revenue (contract liabilities)	None	ASC 606	Billings
3000s Equity	Preferred and common stock; paid-in capital; accumulated deficit	None	State law; financing documents	Cap table reconciliation
4000s Revenue	Subscription; usage; professional services	Product or plan	ASC 606-10-50-5; Regulation S-X Rule 5-03	Revenue and gross margin by stream
5000s to 6000s Expenses, by nature	Salaries and benefits; stock-based compensation; commissions; contractors; hosting; software subscriptions; payment fees; advertising; travel; rent; depreciation and amortisation	Department: hosting and support, customer success, professional services, R&D, sales, marketing, G&A	Regulation S-X Rule 5-03; ASU 2024-03	Gross margin, CAC, R&D ratio, the ASU 2024-03 table
Contra lines inside expenses	Commissions capitalised; software development capitalised	Department (sales; R&D)	ASC 340-40; ASC 350-40	Gross spend for the metrics
7000s to 8000s Other	Interest; foreign exchange; income taxes	None	Regulation S-X Rule 5-03	EBITDA

Source: CX Cash synthesis of FASB ASC 606, 340-40 and 350-40, FASB ASU 2024-03 and SEC Regulation S-X Rule 5-03. Account numbers are illustrative.

What is a chart of accounts?

It is the index of the general ledger. Wikipedia defines it as “a list of financial accounts and reference numbers, grouped into categories, such as assets, liabilities, equity, revenue and expenses, and used for recording transactions in the organization’s general ledger” (Wikipedia, Chart of accounts). The first digit of the number usually marks the group, as in the 1000s to 8000s above. Asset, liability and equity accounts roll up into the balance sheet, and revenue and expense accounts into the income statement: that is how the three financial statements share one ledger.

A chart is hard to undo, since accounts “would not generally be removed, especially if any transaction had been posted to the account”. Xero, which sells accounting software, says that for a small business “A straightforward list of 30 to 50 accounts is usually enough” (Xero).

Who decides what goes in a SaaS chart of accounts?

In the United States, the company does. Unlike France and Germany, the US sets no national chart for companies (Wikipedia). The exception is the federal government. Since 1996 each agency’s systems have had to comply with “the United States Government Standard General Ledger at the transaction level” (31 U.S.C. 3512 note), a uniform chart kept by the Treasury’s Bureau of the Fiscal Service (Fiscal Service). A company’s only constraints are the reports it must produce.

Three readers cut the same costs three ways. The SEC asks for captions by function: Rule 5-03 of Regulation S-X wants revenues from services, then “(d) cost of services”, then selling, general and administrative expenses (17 CFR 210.5-03). FASB now asks for nature inside each caption. For annual periods beginning after 15 December 2026, ASU 2024-03 requires public business entities to disclose employee compensation, depreciation and intangible asset amortization within every relevant expense line. They must also report total selling expenses and “an entity’s definition of selling expenses” (FASB, 2024; date clarified in ASU 2025-01). The SaaS metrics behind startup planning and forecasting ask for function again, applied to spending: gross margin needs cost of revenue, CAC and the magic number need sales and marketing, R&D intensity needs R&D.

Why key each cost by department instead of adding accounts?

Because in a SaaS chart of accounts one department key per transaction answers all three readers, and extra accounts answer only one. Separate “Wages, Support” and “Wages, Sales” accounts serve the functional P&L alone. The SaaS CFO calls this the inline structure, where “we must repeat our GL accounts” (Murray). One wage account with a department on each line can be summed by nature, by function or by both.

Charities already report this way. Part IX of IRS Form 990 splits each natural expense, from salaries to depreciation, across program services, management and general, and fundraising, and “Section 501(c)(3) and 501(c)(4) organizations must complete all columns” (IRS, Form 990 (2025)). A company that keeps both keys from its first month-end close produces the ASU 2024-03 table as a pivot; one that does not must retrofit the split before its first annual report as a public company.

What belongs in cost of revenue for a SaaS company?

Whatever the company’s written policy says, within limits. Regulation S-X asks for “cost of services” without defining it, so every company writes its own boundary. Datadog counts “a customer success team that handles new customer on-boarding and expansions in existing customers” as one of four areas of its sales team (Datadog, 2026). Workiva’s cost of revenue covers personnel “directly associated with our professional services, customer success teams and training personnel” (Workiva, 2026). The same function sits on opposite sides of gross profit.

Seven SaaS filers, seven sets of choices about the same costs

Company (fiscal year)	GAAP gross margin	Customer success	Capitalised software, amortised in cost of revenue	Commission amortisation period
Atlassian (to June 2026)	84.8%	Not stated	None capitalised	4 years
HubSpot (2025)	83.8%	Not stated; support in cost of revenue	Yes	About 2 to 4 years
Datadog (2025)	80.0%	Sales and marketing	Yes	4 years
Workiva (2025)	78.5%	Cost of revenue	None described	3 years
Okta (to January 2026)	77.4%	Not stated; support in cost of revenue	Yes	Generally 5 years
Zoom (to January 2026)	77.0%	Not stated	Yes	3 years; 5 from 31 January 2026
Snowflake (to January 2026)	67.2%	Not stated; support in cost of revenue	Yes	5 years

Source: each company’s latest Form 10-K (Atlassian, HubSpot, Datadog, Workiva, Okta, Zoom, Snowflake). Gross margin is gross profit divided by revenue, our arithmetic. “Not stated” means the filing’s cost definitions do not mention customer success. Snowflake bills on consumption, so its margin is not a like-for-like peer.

A reader of The SaaS CFO warned that the choice “can swing your margins”. Ben Murray’s rule is to code a selling customer-success team to sales and an onboarding or retention team to cost of revenue (The SaaS CFO). Benchmarkit’s 80% median software margin for 2026 rests on boundaries each respondent drew for itself (Benchmarkit, 2026). The policy fits on one page: which departments sit above gross profit, where customer success and software amortisation go, and when each choice took effect.

Amortisation has a firmer rule. All five filers in the table that capitalise software charge its amortisation to cost of revenue. The SEC staff says such charges “should not be positioned in the income statement in a manner which results in reporting a figure for income before depreciation” (SEC, SAB Topic 11.B). A private company that parks amortisation below gross profit reports a margin no registrant could show without a label.

How should a SaaS company record capitalised commissions?

As an asset, through a contra line, so that spend and GAAP expense both stay visible. ASC 340-40 tells a company to “recognize as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs”, and names a sales commission as the example (FASB, ASU 2014-09). The period can be long: the standard’s Example 2 spreads a five-year contract’s commission over seven years, expecting renewals.

The period is a judgement, and it changes the expense. A $120,000 commission costs $40,000 a year over three years and $24,000 over five, 40% less in the first year. At the end of fiscal 2026 Zoom decided to “increase the amortization period from three years to five years”, and expects sales and marketing expense to fall by $90.0 million to $95.0 million in fiscal 2027 (Zoom, 2026). That is about 6.5% to 6.8% of its fiscal 2026 total of $1,388.3 million. No salesperson was paid a dollar less.

In a growing company the asset fills faster than it drains. HubSpot deferred $323.5 million of commissions in 2025 and amortised $187.8 million, so its income statement carried 58 cents for every dollar it capitalised (our arithmetic). The $135.7 million gap is 9.8% of its sales and marketing expense. Sales efficiency computed on GAAP expense therefore flatters any company whose commission asset is growing.

How does capitalised software change gross margin?

It moves engineering payroll from R&D, below gross profit, into cost of revenue, above it, a year or more later. Under ASC 350-40 a SaaS company capitalises part of that payroll as internal-use software and amortises it. At HubSpot, amortisation of capitalised software accounted for $42.6 million of the $108.5 million rise in subscription cost of revenue in 2025, or 39.3%. Atlassian, with $6.6 billion of revenue, capitalises none.

ASU 2025-06 removes the project stages from Subtopic 350-40 for annual periods beginning after 15 December 2027. FASB expects less capitalisation of software “provided via a cloud computing arrangement” (FASB, ASU 2025-06). Investors told the Board that “some companies capitalize software costs, while others expense all software costs”. Preparers replied that disclosing expensed costs would need new systems, “including detailed time tracking” (BC98 to BC100). FASB required no new disclosure, so the gross figure investors want will exist only where the ledger kept it.

How do gross spend and GAAP expense stay in one ledger?

Book every move separately: the salary or commission goes first to its natural account and department. A second entry credits a contra line in the same department and debits the asset. Amortisation returns through its own natural account, so GAAP expense = gross spend − amounts capitalised + amortisation holds in every department. The separate entries also leave a trail. In June 2002 the SEC charged WorldCom with a fraud of more than $3.8 billion, alleging that “the company transferred these costs to capital accounts in violation of established generally accepted accounting principles” (SEC, Litigation Release 17588). A capitalised commission has the same journal shape; only the authorising rule and a visible entry separate the two.

The ledger below belongs to a hypothetical SaaS company with $8.0 million of revenue and $3.0 million of new ARR in the year.

A hypothetical SaaS ledger keyed by nature and department, $ thousands

Natural account	Hosting and support	Customer success	R&D	Sales	Marketing	G&A	Total
Salaries, benefits and payroll taxes	450	400	2,600	1,500	500	800	6,250
Sales commissions				600			600
Hosting and infrastructure	700		150				850
Software subscriptions	50	30	120	80	60	90	430
Advertising and events					700		700
Contractors and professional fees			200			250	450
Gross spend	1,200	430	3,070	2,180	1,260	1,140	9,280
Commissions capitalised (ASC 340-40)				−480			−480
Amortisation of capitalised commissions				170			170
Software development capitalised (ASC 350-40)			−390				−390
Amortisation of capitalised software	130						130
GAAP expense	1,330	430	2,680	1,870	1,260	1,140	8,710

Hypothetical company with illustrative amounts; we computed the totals.

One ledger gives a gross margin between 78.0% and 85.0%, depending on two choices

View	Cost of revenue ($k)	Gross margin	Sales and marketing ($k)	New ARR per $1 of S&M	Months of gross profit to recover S&M
GAAP, customer success in cost of revenue	1,760	78.0%	3,130	0.96	16.1
GAAP, customer success in S&M	1,330	83.4%	3,560	0.84	17.1
Gross spend, customer success in cost of revenue	1,630	79.6%	3,440	0.87	17.3
Gross spend, customer success in S&M	1,200	85.0%	3,870	0.78	18.2

Hypothetical company from the ledger above: revenue $8.0M, new ARR $3.0M. Months to recover = S&M ÷ (new ARR × gross margin) × 12, a simplified CAC payback. Derived from that ledger.

Every row is defensible, and they disagree. Gross margin spans 7.0 points, and new ARR per dollar of sales and marketing runs from 0.78 to 0.96. If the last row is the true cost, a board that approves sales hiring on the first pays about 24% more per dollar of new ARR than it believes. A simplified CAC payback period runs 16.1 to 18.2 months. The costly mistake is switching rows between meetings, or setting one row against another company’s. With two keys and the contra entries, any row is a query.

Is a two-key ledger too much for a seed company?

Practitioners argue that a full SaaS chart of accounts can wait. Milestone warns that “There’s no reason for a startup with five customers to build a COA with 80 accounts” (Milestone). Ben Murray, who recommends department coding, concedes that “Your auditors only care that you are posting to the correct general ledger account” (The SaaS CFO).

Both points hold today for private companies, which may elect out of the ASC 340-40 disclosures and the quantitative revenue disaggregation of ASC 606 revenue recognition. Two keys also shorten the list, as Milestone wants, by replacing the repeated accounts of an inline chart.

Where the case fails is timing. The department key costs one field per line at setup, against the retrofit FASB’s preparers described, and auditors’ indifference ends at listing, when ASU 2024-03 puts the nature-by-caption table into audited notes. A seed company that starts with few natural accounts, a department on every line and contra entries for whatever it capitalises has Milestone’s short list and, from the same rows, the table a listing will require.

References

• Atlassian Corporation (2026). Form 10-K for the fiscal year ended 30 June 2026.
• Benchmarkit (2026). 2026 B2B SaaS and AI-Native Performance Benchmarks.
• Bureau of the Fiscal Service, US Department of the Treasury. The U.S. Standard General Ledger.
• Datadog, Inc. (2026). Form 10-K for the year ended 31 December 2025.
• Federal Financial Management Improvement Act of 1996, §803(a), set out as a note to 31 U.S.C. 3512.
• FASB (2014). Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606), including Subtopic 340-40.
• FASB (2024). Accounting Standards Update 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40).
• FASB (2025). Accounting Standards Update 2025-01, Clarifying the Effective Date.
• FASB (2025). Accounting Standards Update 2025-06, Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40).
• HubSpot, Inc. (2026). Form 10-K for the year ended 31 December 2025.
• Internal Revenue Service. Form 990 (2025), Return of Organization Exempt From Income Tax, Part IX.
• Milestone. SaaS Chart of Accounts: Examples and Best Practices.
• Murray, B. Sample Chart of Accounts in SaaS and How to Properly Structure Your SaaS Accounting Foundation. The SaaS CFO.
• Okta, Inc. (2026). Form 10-K for the fiscal year ended 31 January 2026.
• SEC. Regulation S-X, Rule 5-03 (17 CFR 210.5-03).
• SEC staff. Codification of Staff Accounting Bulletins, Topic 11.B.
• SEC (2002). Litigation Release No. 17588, SEC Charges WorldCom with $3.8 Billion Fraud.
• Snowflake Inc. (2026). Form 10-K for the fiscal year ended 31 January 2026.
• Wikipedia. Chart of accounts.
• Workiva Inc. (2026). Form 10-K for the year ended 31 December 2025.
• Xero. What is a Chart of Accounts? (glossary page).
• Zoom Communications, Inc. (2026). Form 10-K for the fiscal year ended 31 January 2026.

Company figures come from each filer’s latest Form 10-K, and the accounting rules from FASB’s published updates and the SEC’s regulations. Percentages and differences printed without a source are computed from the filings, and the ledger and margin tables describe a hypothetical company. Xero’s range of 30 to 50 accounts is a software vendor’s guidance.