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Creating a chart of accounts for a biotech startup

Establishing a financial framework for your biotech startup is crucial for your long-term success. One of the fundamental building blocks in the accounting process is the chart of accounts (COA). While many types of accounts are common to most businesses, your startup will need a chart of accounts tailored specifically to the unique needs of your growing biotech venture. From navigating regulatory requirements to optimizing financial transparency, a well-structured chart of accounts can empower biotech founders to effectively manage their finances and drive innovation forward.

Biotech companies have unique accounting needs

Biotech startups focus on leveraging biological processes, organisms, or systems to develop innovative products, technologies, or services aimed at addressing challenges in healthcare, agriculture, environmental sustainability, or other related fields. That also means biotech startups need accounts that other businesses may not, for things like laboratory equipment maintenance or expenses related to clinical trials.

Specialized chart of accounts that a biotech startup might use

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.

Biotech specific chart of accounts

Account Number Account Name Account Type Detail Type
104000 Cash Current Assets Checking
120000 Accounts Receivable Current Assets Accounts Receivable
139000 Inventory Current Assets Inventory
131100 Prepaid Expenses Current Assets Prepaid Expense
153000 Office Equipment Current Assets Furniture & Equipment
159000 Accumulated Depreciation Current Assets Accumulated Depreciation
210000 Accounts Payable Liabilities Accounts Payable
220000 Credit Card Liabilities Credit Card
237000 Deferred Revenue Liabilities Deferred Revenue
240000 Long-term Liabilities Liabilities Loan
301000 Common Stock Equity Common Stock
309000 Retained Earnings Equity Retained Earnings
4000000 Sales Sales Sales
406000 Grants Revenue Sales Grants
602100 Salaries and Wages Expense Salaries & Wages
612000 Utilities SG&A Expense Utilities
614000 Rent SG&A Expense Rent
604000 Professional Fees SG&A Expense Professional Fees
698000 Insurance SG&A Expense Insurance
700000 Research and Development Expenses R&D Expense Research & Development
730000 Laboratory Supplies R&D Expense Supplies
810000 Depreciation Expense Other Operating Expenses Depreciation
901000 Interest Income Other Income / Expenses Interest Income
902000 Taxes and Licenses Other Income / Expenses Taxes & Licenses

Types of accounts a biotech firm may need

While the chart of accounts in the table above covers some of the essential financial categories for a biotech, there might be some unique accounts specific to a biotech startup’s operations that are not part of a standard chart of accounts. Here are a few potential unique account categories:

  • Clinical Trial Expenses. This account would track the costs associated with conducting clinical trials for medical therapies, including expenses related to patient recruitment, monitoring, and regulatory compliance.
  • Biomedical Research Grants. If the research group frequently receives grants specifically for biotech research, it might be beneficial to have a separate account to track the funds received and expenses incurred under these grants.
  • Intellectual Property Expenses. Given the focus on developing biotech, there could be expenses related to obtaining patents or licensing intellectual property rights for proprietary technologies or discoveries.
  • Drug Development Costs. This account would track expenses related to the development of new drugs or therapies, including costs for preclinical studies, formulation development, and toxicology testing.
  • Lab Equipment Maintenance. Since the research likely relies heavily on specialized laboratory equipment, having a separate account to track maintenance and repair costs for this equipment could be useful.
  • Clinical Regulatory Compliance Expenses. This account would capture costs associated with ensuring compliance with regulatory requirements for clinical trials and drug development, such as fees for regulatory submissions and inspections.

These unique accounts would provide more detailed insight into the financial aspects of your biotech startup’s operations, and help in accurately tracking expenses and revenues specific to your activities in biotechnology research and development.

The process of building a chart of accounts for your biotech 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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