When you start a business, you might be tempted to lump everything under "Office Expenses" or the dreaded "Miscellaneous." But as you scale, bad categorization turns your financial data into a useless blurry mess. A clean Chart of Accounts (your categorization system) is the foundation of strategic decision-making.

The "No Miscellaneous" Rule

If you take nothing else from this post, take this: Delete your "Miscellaneous" category.
It is a black hole where insights go to die. If an expense doesn't fit a category, create a new one, or put it in "General Administrative." "Miscellaneous" implies you don't know what you are spending money on.

Parent and Child Categories

Don't have a list of 100 flat categories. Use a hierarchy.

• Parent: Marketing

  • Child: Ad Spend (Facebook/Google)

  • Child: Software (HubSpot, Mailchimp)

  • Child: Contractors (Designers, Copywriters)

Consistency is King

The goal of categorization isn't tax compliance; it's comparison. You want to be able to compare "Marketing Software" in January vs. July. If you book HubSpot to "Software" one month and "Marketing" the next, you lose the ability to spot trends. Pick a lane and stay in it.