2024 Chart of Accounts for Digital Agencies (With Example!)

In your agency, you have a million things to track: various campaigns, clients, vendors, freelancers, tools, expenses, and more.

Now imagine that you need to find out what you spent $2,932.32 on last February… and why.

Perhaps your finance manager or worse, the IRS, needs to see all of the invoices and receipts from May to November last year.

Are you going to hunt through a pile of paperwork in your desk drawer?

We hope not!

This is where your chart of accounts comes in.

In today’s blog, we’re going to go over what the chart of accounts is, why you need one, and how to create a chart of accounts for digital agencies.

Let’s dive in.

Let’s Start With the Basics…

First things first, what is a chart of accounts?

A chart of accounts is basically a comprehensive list of all the financial accounts that your business uses, organized by category.

Each of these financial accounts corresponds to a specific aspect of your agency’s financial operations, allowing you to easily track assets, liabilities, equity, revenue, and expenses with accuracy.

Think of it as the backbone of your financial reporting system, ensuring that every dollar that goes in and out is properly accounted for.

Why is a Chart of Accounts Important?

A well-structured chart of accounts (CoA) is helpful for many reasons:

#1 Financial Clarity: A CoA organizes all your financial transactions into categories, making it easy to see your income, expenses, assets, and liabilities at a glance. This helps you quickly understand your financial position.

#2 Better Decision-Making: By having a detailed breakdown of your finances, you can identify trends and make informed decisions. For example, you can see if you’re spending too much on a particular service or if you have enough profit to hire a new employee or invest in new tools.

#3 Simplified Tax Preparation: With your financial data categorized and organized, your accountant can easily find the information they need to prepare your taxes. This reduces the time spent searching for receipts and invoices, ensuring accurate and timely tax filings.

Setting Up a Chart of Accounts for Your Digital Agency

Creating a chart of accounts (CoA) may not seem exciting, but it’s an important step for managing your finances effectively. Here’s how to get started:

Step 1: Categorize Your Accounts

Group your financial accounts into the following categories:

• Assets: Resources your business owns, like cash, accounts receivable (money owed to you), office supplies, and software.
• Liabilities: Debts your business owes, such as accounts payable (money you owe to others), credit card debt, and loans.
• Equity: The owner’s stake in the business, including invested capital and retained earnings.
• Revenue: Money your business earns from services, such as consulting fees and advertising revenue.
• Expenses: Costs incurred to run your business, like salaries, rent, utilities, and marketing expenses.

Step 2: Assign Account Numbers

Assign unique numbers to each account for better organization. This helps keep similar accounts together and makes it easier to navigate your financial records. For example, you might number asset accounts from 1000 to 1999, liabilities from 2000 to 2999, and so on.

Step 3: Input Your Accounts into Accounting Software

After organizing and numbering your accounts, enter them into your accounting software. This allows for seamless integration with other tools you use, like invoicing or expense-tracking software. Automated categorization reduces manual data entry and minimizes errors, keeping your financial records accurate and up-to-date.

How Do You Use Your Agency Chart of Accounts?

The chart of accounts is most commonly used in your bookkeeping or accounting software, and depending on which software tool you use, the process for uploading your chart of accounts will differ. 

For QuickBooks, you can follow these instructions: 

• Sign in to QuickBooks Online.
• Select Settings ⚙. Then select Import Data.
• Select Chart of Accounts.
• To upload a file from your computer, select Browse and choose the file. Then select Open.
• Select Next.
• Map your spreadsheet to QuickBooks fields
• Import your chart of accounts

For Xero, you can follow these instructions.

Our advice? Make a copy of our COA example down below, customize it for your agency, and upload it to your bookkeeping software. Voila!

Example Chart of Accounts for a Digital Agency

Your agency might be more complex than the average small business, but that doesn’t mean your chart of accounts needs to be. In fact, we recommend keeping it really simple, especially in the beginning.

To help you get started, here’s an example of a streamlined chart of accounts, similar to what we’d recommend for our clients:

Note: your chart of accounts should be unique to your agency, and will vary depending on how you track your projects. To get help with your specific chart of accounts, you can reach out to our team anytime. 

Need Extra Help With Your Chart of Accounts?

We hope you’ve found our overview of the agency chart of accounts helpful and that you can use our example for your own digital agency.

However, we’ve only scratched the surface when it comes to maintaining healthy financial records for your agency.

If you have more questions, need confirmation, or just want someone to take accounting off of your hands altogether, we’re here to help. 

It’s what we’re here for! 

Simply use our calendar here to get started.

Until next time!