Designing a simple chart of accounts for service based businesses

“What gets measured gets managed.” — Peter Drucker

Disclaimer. This guidance is general in nature and not tailored financial, accounting, or legal advice. Consult a qualified accountant or tax adviser before changing your chart of accounts or reporting processes.

Introduction

A COA should answer one question: what will you do with the information it produces? For most sole traders and micro SMEs the immediate answers are tax lodgements and a fast, reliable view of cash. Design the COA to be as small as possible while mapping cleanly to tax lines and producing the cash and margin signals owners actually use. Use high‑level accounts and rely on classes/tags for occasional detail. Eliminate manual work, automate categorisation, and delegate reconciliations so the owner’s role is review and decision‑making only.

Three strategies to implement a finance first onboarding

Strategy 1 Guarantee tax compliance and cash visibility

• Map accounts to tax lodgement lines so routine reporting is a simple export.

• Prioritise balance sheet clarity for bank, receivables, payables, and retainer accounts so cash position is obvious at a glance.

• Keep P&L buckets broad so month‑end reviews are quick and meaningful.

Strategy 2 Keep granularity high level and assignable

• Use a small set of P&L categories that can be owned by people or roles (sales, delivery, admin).

• Use classes or tags for service lines, projects, or clients when deeper analysis is occasionally required.

• Avoid dozens of micro‑accounts that create bookkeeping overhead and misclassification risk.

Strategy 3 Operate cloud‑first: eliminate, automate, delegate

• Eliminate paper and ad‑hoc spreadsheets.

• Automate bank feeds, rules, recurring invoices, and default class assignment.

• Delegate routine reconciliation and month‑end cleanup to a bookkeeper; owner reviews exceptions only.

Implementation checklist

• Decide purpose — Confirm the COA’s primary guarantees: tax compliance and cash visibility.

• Design core accounts — Build a short list of balance sheet and P&L accounts that map to tax lines and cash signals.

• Define classes/tags — Create 3–6 classes for service lines or projects and a client tag for profitability checks.

• Set automation rules — Bank feed rules, invoice templates with default classes, and retainer handling.

• Document SOPs — Short step‑by‑step guides for transaction entry, reconciliation, and month‑end review.

• Assign owners — One accountable person per account group and a backup.

• Pilot — Run one month, fix misclassifications, then lock the COA.

• Review cadence — Quarterly review or immediately after a strategy change.

Next steps

1. This week: Create the core accounts and 3 classes in your cloud accounting system.

2. Within 14 days: Connect bank feeds, set 5–10 bank rules, and build an invoice template with default class assignments.

3. Within 30 days: Run a month‑end snapshot, refine rules, document SOPs for ownerable actions, and assign owners.

Useful AI prompts

• “Generate a 12‑line chart of accounts for a small service business with classes for two service lines.”

• “Write five bank feed rules to auto‑categorise common transactions for a service business.”

• “Create a one‑page snapshot template for owner review with fields and example thresholds.”

• “Draft a short AR follow‑up script for overdue invoices with three escalation stages.”

About Mission Command Business

Mission Command Business helps small enterprises move from chaos to control with simple finance frameworks, automation playbooks, and owner‑focused SOPs so you can protect cash, enforce pricing discipline, and reclaim time.