![]() ![]() ![]() Cost of sales is also sometimes referred to as cost of revenue (COR). Cost Of Sales (COS): The cost of sales category is reserved for any costs involved in sourcing or manufacturing your product and getting it into the hands of your customers.While other categories exist - financing costs, for example - the following are the direct costs involved with operating the business on a daily basis. The following terms represent categories into which startups typically allocate specific costs associated with running a business. What’s The Difference Between Cost Of Sales Versus Expenses For SaaS Startups?īefore we jump into some practical examples of categorizing your SaaS startup’s expenses, we first need to define and compare a few accounting terms. The following guide breaks down the differences between cost of sales versus expenses in other areas to help you make sure that you properly allocate every item. Failure to do so could result in inconvenient and troublesome audits, inaccurate financial statements or problems completing the due diligence phase during future business transactions. Though it’s possible to get by for a while without learning how to allocate SaaS costs properly, it will eventually become necessary to streamline the process and make sure all expenses are correctly categorized. Determining which expenses belong in which categories can become a complex issue. Instead, your product racks up digital costs that scale with usage. You don’t have a physical product sitting on a shelf in a warehouse or a retail store. Even those experienced with traditional business accounting can stumble over the many differences between SaaS operating expenses and the expense categorizations used by other business models. In particular, they may only have a cursory understanding of SaaS business models. However, business leaders rarely have in-depth knowledge of multiple industries at once. Without a deep understanding of the industry, it’s unlikely that a business owner could guide and shape a business from an idea into a thriving company. Successful SaaS startups, by necessity, usually have well-rounded, competent founders and executives focused on growing the business. ![]()
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