Accounting Finance skill

Accounting & Finance

Not tax, legal, or audit advice. This skill encodes general operator practice and standard frameworks (US GAAP, IFRS, ASC 606/IFRS 15, EU VAT). Rates, thresholds, registration triggers, and filing rules change and are jurisdiction-specific. Before filing anything or relying on a number for a board, lender, investor, or tax authority, have it reviewed by a qualified accountant/tax advisor licensed in the relevant jurisdiction. Route any edge case — multi-state US nexus, cross-border digital services, equity/SAFE accounting, R&D capitalization, transfer pricing, M&A, or revenue-recognition judgment calls — to a professional. Treat every concrete rate/threshold below as "verify before use."

Sibling skills (don't duplicate — cross-link): country-level tax depth → eu-tax-accounting (all 27 EU member states: corporate, VAT, payroll, deadlines). Billing/dunning/usage metering implementation → saas-billing (Express/Node) or stripe-billing (Next.js). Pricing/packaging → pricing-optimization. GTM funnel/forecasting → revenue-operations. Churn/retention cohort analysis → retention-analytics. EU regulatory (GDPR, contracts, entity) → eu-legal-compliance.

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1. P&L Structure (GAAP / IFRS)

Standard multi-step income statement. Key rule: define what OpEx contains so D&A is counted exactly once. Below, operating expenses are stated excluding depreciation & amortization (the "ex-D&A" convention common in SaaS reporting); D&A is its own line. EBITDA then equals operating income + D&A with no double-count. If your accounting system buckets D&A inside OpEx, drop the separate D&A line and compute EBITDA = operating income + D&A (added back), not by re-subtracting it.

EBITDA vs Adjusted EBITDA: "Adjusted EBITDA" further adds back stock-based compensation, one-time/restructuring items, and M&A costs. Always label which one you're showing and footnote the add-backs — investors discount unexplained adjustments. Rule of 40 (growth % + FCF or EBITDA margin % ≥ 40) is a common SaaS health check, not a GAAP metric.

Monthly P&L review checklist

• Recognized revenue reconciles to the billing system and the deferred-revenue roll-forward (§6), not just to cash.
• COGS contains only cost-of-delivery; S&M/R&D/G&A are not leaking into it.
• Headcount fully loaded (salary + employer payroll tax + benefits) and allocated to the correct function.
• One-time/non-recurring items flagged and excluded from run-rate and from EBITDA→Adjusted EBITDA.
• D&A counted once (per the convention you chose above).
• MoM and YoY comparatives included; material variances explained (§8).
• Accruals booked for incurred-but-unbilled expenses (the close, §5).

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2. Cash Flow Forecasting

13-week rolling direct cash forecast (the operator standard)

Forecast cash in/out, not accruals. Rebuild weekly from the bank balance.

Week | Start cash | + AR collected | + Other in | − Payroll | − Vendors/AP | − Tax/VAT | − Debt svc | = End cash
1    | 150,000    | 45,000         | 0          | 30,000    | 8,000        | 0         | 0          | 157,000
2    | 157,000    | 12,000         | 0          | 0         | 5,000        | 0         | 2,500      | 161,500
3    | 161,500    | 28,000         | 5,000      | 30,000    | 9,000        | 14,000    | 0          | 141,500
...
13   | ...

Rules

• Use cash collected (apply realistic AR collection lag: e.g. net-30 invoices land in week 5–6, with a haircut for late payers), not revenue recognized.
• Payroll on actual pay dates (semi-monthly/biweekly/monthly) including employer taxes; biweekly = 26 pay runs/yr (two 3-paycheck months).
• VAT/sales-tax remittances and corporate-tax instalments on statutory due dates — these are large, lumpy, and easy to forget.
• Model AP on actual vendor terms; don't assume everything clears in the booking week.
• Flag any week where ending cash dips below a defined floor (e.g. ≥ 2 months of operating burn or a debt covenant minimum).
• Keep a low/base/high collections scenario for any week with concentrated customer risk.

Burn & runway

Gross burn   = total operating cash OUT in the month (exclude one-offs / financing)
Net burn     = gross burn − cash revenue collected      (the number that actually depletes the bank)
Runway (mo)  = current cash balance / average forward NET burn   (use a 3-month trailing avg, not a single noisy month)

Runway is a trigger to plan, not a script. A short runway with predictable recurring revenue, an open credit line, and a near-term profitability path is very different from a short runway with lumpy revenue and no debt access. Weigh: revenue predictability & retention (§3), fundraising-market conditions, debt availability and covenants, the path/time-to-default-or-breakeven, dilution at the current valuation, and the owners'/board's risk tolerance. Generally start serious fundraising 9–12 months before zero cash (a raise commonly takes 3–6 months), and pre-model the cost-cut lever you'd pull if a round slips — but the right move is situational; pressure-test it with the board/CFO.

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3. SaaS / Subscription Unit Economics

MRR / ARR movement schedule (single source of truth for "growth quality")

                         Month
Beginning MRR            100,000
+ New (new logos)         12,000
+ Expansion (upsell)       6,000
+ Reactivation             1,000
− Contraction (downsell)  (3,000)
− Churned (lost logos)    (5,000)
= Ending MRR             111,000
ARR = Ending MRR × 12 =  1,332,000

• Quick Ratio = (New + Expansion + Reactivation) / (Contraction + Churned). > 4 is strong; < 1 means you're losing ground.
• Reconcile this schedule to the deferred-revenue roll-forward (§6) and to recognized revenue (§1) every month.

Retention — measure logo and revenue separately

CAC, LTV, payback — state your assumptions or the numbers lie

Common mistakes: mixing gross vs net churn; forgetting gross-margin adjustment in payback/LTV; counting organic logos in paid CAC; ignoring the S&M→revenue timing lag; using a single month's churn (annualize a multi-month cohort). For deep cohort/retention curves see retention-analytics.

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4. Bookkeeping Automation, Chart of Accounts & the Monthly Close

The biggest leverage point: a clean chart of accounts (COA) + a repeatable close + automated bank feeds + approval controls.

4a. Chart of accounts (SMB/SaaS starter — numeric ranges)

Group by the P&L/balance-sheet line it rolls into so reporting is automatic.

Rules: keep it shallow (use classes/tags/departments for dimensions, not 200 accounts); never expense to a bank/AP account; reserve a contra account for refunds; reconcile 2300 Deferred revenue to the §6 roll-forward and 2400 Sales-tax/VAT payable to filed returns.

4b. Bank-feed reconciliation workflow

1. Connect bank/credit-card feeds (Plaid/native) into the ledger (QuickBooks Online, Xero, NetSuite, Wave).
2. Set bank rules to auto-categorize recurring lines (payroll provider → 6000/6010; Stripe payout → split fee 5200 vs gross; AWS → 5000).
3. Match feed transactions to existing invoices/bills; create from rules only when unmatched.
4. Clear the bank rec so ledger balance = bank statement balance every month; investigate any unreconciled item — never "plug" it.
5. Reconcile the Stripe/PSP payout: gross charges − processing fees − refunds = net deposit; book fees to 5200, not as a revenue contra.

4c. Monthly close checklist (target: business-day +5)

• All bank & credit-card accounts reconciled to statements (4b).
• AR aging reviewed; bad-debt reserve assessed.
• AP complete; accruals booked for incurred-but-unbilled costs (cut-off).
• Prepaids amortized (insurance, annual SaaS tools).
• Depreciation/amortization run for the period.
• Deferred-revenue roll-forward posted; revenue recognized per ASC 606/IFRS 15 (§6).
• Payroll fully recorded incl. employer taxes and PTO accrual.
• Sales-tax/VAT liability reconciled to returns/registers.
• Intercompany/owner transactions cleared (no personal expenses in the company ledger).
• Flux/variance review vs prior month, budget, and forecast (§8); lock the period.

4d. Approval controls, receipt capture & audit trail (segregation of duties)

• Separate who requests, approves, and pays — no single person initiates and disburses (fraud control). In tiny teams compensate with owner review of the bank feed + dual sign-off above a threshold.
• Spend authorization matrix: e.g. < €500 manager · €500–5k department head · > €5k founder/CFO · > €25k board. Document and enforce in the AP/expense tool.
• Receipt capture: require an itemized receipt per expense (Ramp/Brex/Pleo/Expensify auto-OCR and attach); enforce a per-transaction documentation rule for tax substantiation.
• Audit trail: keep an immutable, time-stamped log of who entered/edited/approved each transaction; restrict ledger admin; never share logins. Retain records per jurisdiction (commonly 7–10 years; verify locally).
• Month-end lock: close the prior period so posted entries can't be silently altered; corrections go through dated adjusting entries.

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5. Invoicing & Accounts Receivable

Invoice/dunning workflow

1. Contract signed → create invoice/subscription record.
2. Invoice issued → send on billing date with a payment link.
3. Track aging by terms (net 15/30/60).
4. Overdue dunning sequence (tune by segment; soften for strategic accounts):
   • Day 1 past due: friendly reminder + link.
   • Day 7: second notice.
   • Day 14: escalate to account owner.
   • Day 30: final notice; assess late fee (if contractually allowed) and collections.

For automated dunning, retries, and payment-failure recovery on Stripe, use saas-billing/stripe-billing — don't hand-roll it.

What a compliant invoice contains

Exact mandatory fields are jurisdiction- and transaction-specific (and differ for a full VAT invoice vs a simplified receipt below a local threshold). General good practice:

• Unique sequential invoice number; issue date (and tax point/supply date if different); due date.
• Supplier legal name, address, and tax/VAT/company registration number where the supplier is registered.
• Customer name and address.
• Line items: description, quantity, unit price; subtotal; tax rate(s) and tax amount per rate; total payable; currency.
• Payment terms and remittance/bank details.

The customer's VAT number is NOT universally required. It is required (and must be valid) when you apply the EU B2B reverse charge / intra-Community supply — without a verified buyer VAT ID you generally cannot zero-rate (validate via VIES). But many customers (consumers, non-VAT-registered small businesses, non-EU buyers) have no VAT number, and that is fine. Likewise, your VAT number only appears if you are VAT-registered. Don't block invoicing on a VAT field that doesn't apply. Confirm the exact field set for your country with eu-tax-accounting or a local accountant.

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6. Revenue Recognition (ASC 606 / IFRS 15)

5-step model: (1) identify the contract → (2) identify distinct performance obligations → (3) determine the transaction price → (4) allocate price to obligations (by standalone selling price) → (5) recognize revenue as/when each obligation is satisfied.

SaaS patterns

Deferred-revenue roll-forward (must tie to the balance sheet and §3)

Beginning deferred revenue        80,000
+ Billings (new + renewals)       30,000
− Revenue recognized this period  (26,000)
= Ending deferred revenue         84,000

Multi-element allocation, contract modifications, variable consideration, and capitalized contract costs (ASC 340-40) involve judgment — get auditor/accountant sign-off before relying on the policy externally.

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7. Tax Compliance Checklists

All rates/thresholds: "verify before use." Jurisdiction-specific; they change. This is not tax advice — confirm with a qualified advisor and file via the official authority. For 27-country EU depth, use eu-tax-accounting.

7a. EU VAT

OSS / IOSS: register in one EU country to report all EU B2C (OSS) / low-value imports (IOSS), avoiding many separate registrations. Standard rates change — verify each at the national tax authority (links in eu-tax-accounting).

EU-wide consolidated/standard-rate list: European Commission Taxes in Europe Database / VAT rates page. Re-verify before invoicing.

7b. EU e-invoicing & digital reporting (ViDA) — 2026 readiness

Structured (machine-readable) e-invoicing and near-real-time digital reporting are being mandated unevenly across the EU and under VAT in the Digital Age (ViDA), which also extends deemed-supplier VAT rules to platforms/marketplaces. Indicative B2B timeline (verify per country): Germany Jan 2025 (must receive), issuance phasing in ~2027–2028; Belgium Jan 2026 (B2B); France Sep 2026 (must receive), Sep 2027 (must issue, large/mid first). Use formats like EN 16931 / Peppol BIS / Factur-X (ZUGFeRD) / FatturaPA (Italy, already live). Action: confirm dates and formats per country in eu-tax-accounting, and ensure your billing tool can emit a compliant structured invoice.

7c. UK VAT (post-Brexit, separate from EU)

• Standard rate 20% (verify at gov.uk); registration threshold historically £90k taxable turnover (verify current figure).
• Making Tax Digital (MTD): VAT returns must be filed via MTD-compatible software with digital record-keeping.
• B2B sales to UK from abroad and low-value imports have specific rules; UK is not in EU OSS — UK VAT is handled separately.

7d. US sales tax / SaaS nexus

• The US has no VAT; sales tax is state (and local), ~45 states + DC, each with its own rules and rates.
• Economic nexus (post-Wayfair): you can owe collection in a state with no physical presence once you cross its sales/transaction threshold — a common one is $100,000 in sales or 200 transactions/yr, but thresholds, the "200 transactions" prong, and whether SaaS is taxable all vary by state — verify each. (Many states dropped the transaction count; some never tax SaaS; a few always do.)
• Steps: track sales by state → monitor each threshold → register where you have nexus → collect at the correct combined (state+county+city+district) rate → file/remit on each state's cadence. Tools: Stripe Tax, Avalara, TaxJar, Anrok automate calc/registration/filing.
• Marketplace facilitator laws: if you sell through a marketplace (Amazon/App Store/etc.), the platform often collects and remits sales tax on your behalf — but you may still have filing obligations; confirm per state.

7e. Payroll tax

• Withhold and remit employee income tax + employee/employer social/payroll contributions on each pay run; deposit on the statutory schedule (penalties for late deposits are steep).
• US: federal income tax withholding + FICA (Social Security/Medicare, employee & employer) + FUTA + state withholding/SUTA; file (e.g.) Form 941 quarterly and W-2s annually — verify current forms/limits.
• EU/UK: employer social security + PAYE-type withholding vary by country; see eu-tax-accounting per state.
• Worker classification (employee vs contractor) is a high-risk audit area — misclassification creates back-tax and penalty exposure; get advice.

7f. Corporate income tax

• Tax expense (accrual, on the P&L) differs from tax paid (cash); most jurisdictions require estimated/instalment payments during the year — model these in the cash forecast (§2).
• Track deferred tax (timing differences) and any usable loss carryforwards; R&D credits/incentives may apply.
• EU corporate rates range widely (e.g. Ireland 12.5%, Germany ~30% effective) — see eu-tax-accounting; verify before relying.

7g. Vendor / contractor information reporting

• US 1099: generally issue 1099-NEC for ≥ $2,000/yr (raised from $600 for tax years beginning after 2025; may be inflation-adjusted from 2027) paid to US non-corporate contractors (collect a W-9 before paying); 1099-K is issued by payment processors/marketplaces; verify the current dollar threshold (it has been changing). Foreign contractors: collect W-8BEN/W-8BEN-E instead.
• EU/UK: equivalents include DAC7 (platform reporting of seller income) and local contractor-reporting/withholding rules — confirm per country.

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8. Budget vs Actual (variance analysis)

Both the Variance and % Var columns below use a single favorable(+) / unfavorable(−) convention — the raw arithmetic delta is shown separately so the two columns never disagree on sign:

Sign convention (the one rule that prevents misreads): for a revenue/income line, actual above budget is favorable; for a cost/expense line, actual below budget is favorable. So COGS coming in €2,000 under budget is +€2,000 favorable even though the raw Actual−Budget is −€2,000 — that is why the "Raw Δ" and "Variance (F/U)" columns can have opposite signs for cost lines. Pick the F/U convention for both the amount and the % and apply it to every row so the table can't be misread. % Var (F/U) = |Actual−Budget| / Budget, signed favorable/unfavorable.

Rules

• Flag variances > 10% for review, > 20% for action.
• Always explain WHY (price vs volume vs timing), not just the delta.
• Distinguish timing variances (will reverse) from permanent ones (reforecast).
• Reforecast at least quarterly off actuals; feed the result back into the cash forecast (§2) and the MRR schedule (§3).