Books that build your monthly pack for you.

Most startups never choose a chart of accounts. The accounting software arrives with a default, the accountant adds an account whenever something does not fit, and eighteen months later the P&L has a hundred and forty lines, three of which are called miscellaneous expenses.

The cost shows up later, as work. Someone rebuilds the monthly pack by hand because the books do not group the way the pack needs. Contribution margin cannot be calculated because payment fees sit inside general expenses. GST input credit cannot be reconciled because there is one tax account instead of four.

A chart of accounts designed once, before the books get busy, removes that work permanently. It is an hour of decisions that saves a few hours every month afterwards, and it decides how quickly you can answer questions about your own business.

It matters more in India than founders expect, because the tax ledgers have to be kept in a particular way for reconciliation to be possible at all. A chart that works for a company in another country often cannot produce the GST and TDS comparisons an Indian company needs every month.

Four groups do more work than the rest, and they are the ones a default chart usually collapses into single lines.

• ·GST, split four ways: input credit for CGST, SGST and IGST separately, plus output tax payable. One combined tax account makes the monthly reconciliation to GSTR-2B almost impossible, and that reconciliation is what diligence teams run first.
• ·TDS in both directions: TDS receivable, which customers deducted from your invoices and which is your money, and TDS payable, which you deducted from vendors and owe by the 7th. Mixing them hides both.
• ·Employer statutory costs as their own lines: PF, ESIC and gratuity expense, separate from salaries. Without them, people cost in the books is not the real cost of employing anyone.
• ·Variable costs separated from direct costs: payment gateway fees, aggregator commission, sales commission, shipping. This is the split that makes contribution margin calculable rather than estimated.

There is a fifth worth adding for anyone with grants or non-operating income: keep it below EBITDA, never in revenue. A grant inside the revenue line flatters growth and will be unpicked by the first serious investor who looks.

The temptation, once a chart exists, is to answer every reporting question by adding an account. Salaries by team, then by location, then by project, and soon there are forty payroll accounts.

Most accounting software supports tags, classes or cost centres. One salary account tagged by team gives you people cost by team without touching the chart, and the same tag can be used across every cost line. Similarly, one revenue account tagged by product or segment supports the unit economics work without multiplying accounts.

A good rule: add an account when the item needs to appear as its own line in the P&L or balance sheet. Use a tag when you want to slice an existing line. Companies that follow it tend to keep a chart of eighty accounts rather than three hundred, and a P&L people actually read.

1. 01Delete what you do not need. A software company with no inventory should not carry materials accounts, and a services firm may not need deferred revenue yet.
2. 02Add what is specific to you: sector licences, particular revenue lines, a cost that genuinely matters in your business.
3. 03Agree the MIS mapping before anything is posted, so the monthly pack is a report rather than a rebuild.
4. 04Hand it to your accountant with the mapping, and ask them to migrate the current books to it from the start of a month or a quarter, never mid-month.
5. 05Map the old accounts to the new ones before migrating, so comparatives still work. Without that step, last year becomes unreadable.
6. 06Freeze it. Changes to the chart get agreed once a quarter, not whenever an entry does not fit.

If your books have already grown messy, the migration is usually a day of work for an accountant and worth doing at the start of a financial year, where the break is natural and comparatives are cleanest. Doing it before a fundraise is better than doing it during one.

Software companies

Split revenue by plan or by new, expansion and services. Keep hosting and third-party model usage as separate direct cost accounts, because model usage is now the fastest growing line in many products and needs watching on its own.

Services firms and agencies

Delivery staff and subcontractors belong in direct costs, not in people costs, so gross margin means something. Add accounts for unbilled revenue and for write-offs, which is where realisation quietly leaks.

Restaurants and cloud kitchens

Food cost, packaging, aggregator commission and the GST on that commission each deserve their own account, and revenue should be split by channel. Tag everything by outlet rather than creating a set of accounts per site.

Healthcare services

Revenue by service line and payer, clinician payouts as a direct cost, consumables separately, and a deliberate account for GST paid on inputs that exempt services cannot recover, because that GST is a real cost rather than a tax asset.

In each case the change is small: two or three accounts added, one or two removed, and the tags chosen carefully. The structure underneath stays the same, which is what lets the MIS, the plan and the model all read from one source.

Set up this way, the monthly pack is a mapping exercise rather than a reconstruction, and the same structure feeds the plan, the model and the unit economics work without anyone translating between three different sets of labels.

• ·The monthly pack is rebuilt by hand because the books do not group the way the pack needs.
• ·Contribution margin cannot be calculated without someone digging through a general expenses account.
• ·There is one tax account, so nobody can reconcile input credit to GSTR-2B.
• ·Salaries sit in one line, so the real cost of a team is unknown until payroll is opened.
• ·A miscellaneous or suspense account carries more than a trivial amount at month end.
• ·Two accounts exist for the same thing, created a year apart, and both are in use.
• ·Nobody can say what a line in the P&L contains without asking the accountant.

Any two of those together usually mean an afternoon with the chart is overdue. The work is unglamorous and it is the cheapest improvement available to most companies' reporting, because every month afterwards gets easier.