Any fintech startup needs a robust financial infrastructure. At the core of this infrastructure is the chart of accounts (COA), a fundamental tool that organizes a company’s financial transactions and provides invaluable insights into its financial health.

A well-structured chart of accounts can empower fintech founders and CEOs to effectively manage their finances, make informed strategic decisions, and generate sustainable growth in the dynamic landscape of financial technology.

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Fintech startups have distinctive requirements

Fintech startups leverage technology to innovate and disrupt traditional financial services. These startups typically offer digital solutions and platforms to enhance financial processes, including payments, lending, investments, insurance, and even personal finance management.

What unique chart of accounts do fintechs use?

That means your fintech’s COAs will have some unique categories that other types of businesses may not need. In fact, there is a huge possible variety of accounts that a fintech company may have based on its business model - for example, insurance companies will have very different looking income statements and balance sheets vs. crypto companies, which all drive very different chart of accounts. Kruze Consulting uses six-digit accounting codes in our charts of accounts, which allows us to create more unique accounts in each category, to capture more information. We have more detail on charts of accounts here.

We use the following categories and number groupings:

Current Assets 100000 -199999
Liabilities 200000 - 299999
Equity 300000 - 399999
Sales 400000 - 499999
Cost of Good Sold 500000 - 599999
Sales, General, and Administrative Expenses 600000 - 699999
Research & Development Expenses 700000 - 799999
Other Operating Expenses 800000 - 899999
Other Income / Expenses 900000 - 999999

Under these accounts, you’ll find sub-accounts that roll up into the main asset category. The first digit of each account number indicates which group the account belongs to.

Fintech specific chart of accounts

Account Number Account Name Account Type Detail Type
104000 Cash Current Assets Checking
105000 Cash in Bank Current Assets Checking
120000 Accounts Receivable Current Assets Accounts Receivable
131100 Prepaid Expenses Current Assets Prepaid Expense
159000 Accumulated Depreciation Current Assets Accumulated Depreciation
210000 Accounts Payable Liabilities Accounts Payable
235100 Accrued Expenses LIabilities Accrued Expenses
301000 Common Stock - Par Value Equity Common Stock
301002 Common Stock - Additional Paid-In Capital Equity Common Stock
309000 Retained Earnings Equity Retained Earnings
401000 Service Fees Sales Service Revenue
505000 Hosting Fees Cost of Goods Sold Other Costs of Services
601000 Marketing and Advertising Expenses SGA Expense Marketing
601009 Cash Back Rewards SGA Expense Marketing
601600 Sales & Marketing - Sales Commission SGA Expense Sales Commissions
604100 Professional Fees - Legal SGA Expense Legal & Professional Fees
700000 Research & Development Expense R&D Expense Other Business Expense
810000 Depreciation Expense Other Operating Expenses Depreciation
901000 Interest Income Other Income / Expenses Interest Income

For a fintech firm, there are several unique accounts that may not be part of a standard chart of accounts.

Here are some potential unique accounts specific to this type of business:

  • Cash Back Rewards. This account tracks the cash back rewards earned by customers who use the firm’s banking services. It represents a liability until the rewards are redeemed by customers.
  • Banking Service Fees. This account tracks the fees charged to customers for various banking services provided by the firm, such as transaction fees, overdraft fees, or account maintenance fees.
  • Marketing and Advertising Expenses. Since the firm may need to promote its banking services to attract renters, it may have specific expenses related to marketing and advertising campaigns targeting potential customers.
  • Transaction Processing Fees. This account tracks fees charged for processing financial transactions, such as credit card transactions, electronic fund transfers, or cryptocurrency transactions.
  • Platform Usage Fees. Reflects revenue generated from usage fees for accessing or utilizing the fintech platform or service, such as subscription fees for software as a service (SaaS) products.
  • Regulatory Compliance Expenses. Tracks expenses associated with ensuring compliance with financial regulations and standards, including costs related to regulatory filings, audits, and compliance software.
  • Technology Development Costs. Accounts for expenses related to the research, development, and implementation of proprietary fintech software, algorithms, or technologies.
  • Cybersecurity Expenditures. Tracks costs associated with maintaining robust cybersecurity measures to protect against data breaches, fraud, and other cyber threats inherent in the fintech ecosystem.
  • Customer Acquisition Costs. Records expenses incurred to acquire new customers, including marketing and advertising costs, referral bonuses, and sales commissions.
  • Licensing and Compliance Fees. Tracks expenses related to obtaining licenses and permits necessary to operate legally in the fintech industry, as well as ongoing compliance fees required to maintain regulatory approval.

These unique accounts provide insight into the financial dynamics of a fintech company and help management make informed decisions to drive growth and profitability in this rapidly evolving sector.

The process of building a chart of accounts for your fintech startup begins with a review of your business to create a list of the types of accounts you’ll need.

To find out more about setting up a COA for your business, contact us.

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