How to Create a Functional Chart of Accounts in Quickbooks

Posted 2022-07-27 10:30:12

For any software company that is just getting started or in its early years, Quickbooks (QBO) is a powerful tool. Sadly, its setup doesn't result in a Chart of Accounts in Quickbooks that is appropriate for SaaS unless you have extensive financial knowledge. I'll walk you through how to set it up so you can trust the data when you want to calculate metrics or analyze trends.

The terms in this guide may be confusing to a new user of QBO, so let's clarify that before we continue. The few I'll be mentioning are listed below.

Chart of Accounts in Quickbooks Online is how you categorize your financial transactions.
Creating individual accounts to track your costs by team using functional accounts
Account classes in QuickBooks are a way to group your transactions by type. Cost of Goods Sold (COGS)

How to Implement Classes in QuickBooks Online

Step 1: Enable and Create Classes

A good job of describing Classes and how to enable them is done by QBO support. We advise developing Classes for each crucial aspect of your business (e.g. customer success, customer support, professional services, sales, marketing, product, engineering, operations, finance, HR, etc.).

Step 2: Review Your Account Structure

Once your classes are created, check to see that your account structure is sound. The issues with common account structures mentioned above can be fixed by creating, deleting, and merging accounts.

Check to see if you have multiple accounts tracking the same kind of spending at this time. There is some consolidation you can do in this case, for instance, I've seen people who have accounts named Rent & Utilities, Rent, and then Utilities. If that's the case, think about combining those accounts to cut down on the number of accounts you have.

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