🎙️ Hey there, SaaSpreneurs!🎙️

🎙️ Hello and welcome to another episode of SaaS Metrics School! I'm your host, Ben Murray. In today's bonus episode, we'll be diving into the topic of coding bonuses. 💰

As a SaaS business, it's crucial to accurately reflect employee-related expenses, including bonuses, in your profit and loss statement. 📊 But the question is, where should you code these bonuses? Should they be coded to Cost of Goods Sold, Operating Expenses, or directly to the departments? 🤔

💸and don’t forget to grab the EARLY BIRD RATE for my SaaS Metrics Foundation Live course. Course kicks off Sep 17th!

By the end of this episode, you'll have a clearer understanding of how to properly code bonuses, leading to a more accurate representation of your SaaS company's financial health. 📈 So, let's get started! 🚀

You can also listen to this episode here.

📓Key Concepts to Learn💡

1. Employee-related expenses should follow the employees to their respective departments. 🏢👨‍💼👩‍💼

Bonuses, wages, taxes, and benefits should be coded to the department where the employees receiving these compensations reside. This ensures the accurate coding of expenses to the appropriate cost centers. 📊💰

2. Bonuses for customer success teams focused on product adoption should be coded to COGS. 💼📈

If a customer success team is primarily focused on product adoption and does not have sales responsibilities, their bonuses should be coded to the Cost of Goods Sold (COGS) section of the income statement. 📦💵

3. Bonus coding depends on the accounting method: cash basis or accrual basis. 💸📅

Under the cash-based accounting method, bonuses are recorded when they are paid out. However, under the accrual-based accounting method, bonuses are usually accrued throughout the year based on performance targets and forecasts. 📆📊

4. Accrual-based accounting requires bonus accruals to be adjusted throughout the year. 🔄📈

When using accrual-based accounting, companies should accrue a portion of the expected bonus each month to avoid a significant lump sum expense in a single month, especially in at fiscal year-end. The accrual amount should be adjusted throughout the year based on the likelihood of achieving the bonus targets. 🗓️🔧

5. Sales commissions should be coded to the department receiving the commission. 🏢💼

Similar to bonuses, sales commissions should be allocated to the department or cost center where the employees earning the commissions belong, typically the sales department. 🏷️💰

6. Accurate bonus coding leads to a more precise SaaS P&L statement. 📊✅

By properly allocating bonuses and other employee-related expenses to the correct departments and cost centers, a SaaS company can maintain an accurate Profit and Loss (P&L) statement, with correct margins by revenue stream and appropriate classification of expenses as COGS or Operating Expenses (OPEX). 🧾📉

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If you found this episode helpful, make sure to tune in to future episodes of SaaS Metric School to broaden your knowledge of essential SaaS metrics and finance topics.

Got any burning questions or specific metrics you'd like us to cover?

Drop us a line, and we'll do our best to address them in upcoming episodes.

Until next time, keep hustling and measuring those metrics!

Best regards,
Ben Murray
Host of SaaS Metric School

P.S. Don't forget to subscribe to our podcast and share it with your SaaS business buddies. Together, let's conquer the world of SaaS metrics!

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