How to set up a simple chart of accounts for a service business
When you create a new QBO account, one of the first things it sets up for you is a chart of accounts. It sounds official, maybe a little intimidating. But it’s just a list!
The chart of accounts is a list of all the buckets your money flows in and out of: your income, your expenses, your bank accounts, your credit cards. And for a service-based business, keeping that list simple is one of the best things you can do for your books.
So what is a chart of accounts, exactly?
Think of it as the skeleton of your bookkeeping. Every transaction you record in QBO gets assigned to an account on this list. That's how your profit and loss statement knows the difference between income from client work and money you spent on software. That's how your balance sheet knows what's in your bank versus what you owe on a credit card.
If your chart of accounts is a jumbled mess of overlapping, vague categories, your reports will be confusing and hard to act on. If it's clean and intentional? Your books will tell you something useful.
What QBO sets up by default (and why you shouldn't just leave it)
QBO auto-generates a chart of accounts when you set up your company. Some of it is great. Some of it is… too much. You may find accounts for things like "cost of goods sold" or "inventory" that simply don't apply to a service business at all.
It's worth taking 20 minutes early on to clean it up so you're not trying to sort transactions into categories that don't make sense for how you actually work.
A simple starting point for service businesses
You don't need dozens of accounts. Here's a clean, practical framework to get you started:
Income
Services Revenue — your primary income from client work. If you offer distinctly different services (say, coaching and done-for-you consulting), you might split this into two accounts. But when in doubt, keep it simple.
Cost of Services (if applicable - you might not need these!)
Subcontractors — if you pay other people to help deliver your services, this is where that goes. (This account is not for actual employees. Payroll wages and taxes have their own special accounts and that’s a whole other thing!)
Direct project expenses — materials or costs tied directly to client work (not your general overhead).
Operating Expenses
Advertising & Marketing — ads, your website, email platform, etc.
Bank & Merchant Fees — credit card processing fees, Stripe fees, PayPal fees.
Dues & Subscriptions — software, apps, professional memberships.
Insurance — business liability, professional liability, etc.
Meals — business meals with clients or team
Office Supplies — the small stuff: paper, pens, printer ink.
Professional Development — courses, books, conferences.
Professional Fees — your CPA, attorney, bookkeeper.
Rent or Lease — office space or co-working memberships.
Travel — flights, hotels, transportation for business purposes.
Utilities — if you have a dedicated office space.
Bank & Credit Card Accounts
These live in QBO as their own account type. Connect each account you use for business — and only your business accounts.
A few things to keep in mind
You don't need a category for everything. Resist the urge to create a new account every time something doesn't fit neatly.
More accounts ≠ more clarity. It can actually mean the opposite. If you have seven different accounts for marketing-related expenses, your reports get fragmented and harder to read and interpret.
You can always edit later. Your chart of accounts isn't set in stone. As your business grows or changes, you can add, merge, or inactivate accounts. Don't let the pressure to get it perfect upfront stop you from starting.
How to get there in QBO
Go to Settings (the gear icon) > Chart of Accounts.
Review what's already there. Anything that doesn't apply to your business? Click the dropdown and select Make Inactive.
To add a new account, click New in the top right corner.
Choose the account type (Income, Expense, etc.), give it a name, and save.
That's it. You're building the foundation your books will run on.
Start simple, stay consistent
The best chart of accounts is the one you'll actually use consistently. When every transaction has a logical, obvious home, categorizing your books gets easier! Easier bookkeeping = more time to invest in your business.
If you'd like a repeatable system for keeping your books clean month after month, grab our Month-End Bookkeeping Checklist — it's a simple guide to the habits that keep everything on track. Get the checklist here.
If you’re starting from behind, here’s how to catch up first.
