Your SaaS COGS (Cost of Goods Sold) is one of the most important foundations in your SaaS P&L — and getting it wrong can distort your gross profit margins, forecasts, SaaS metrics, investor metrics, and ultimately your valuation. In this episode, Ben Murray breaks down exactly what belongs in SaaS COGS, how to handle multi-hat employees, and why clean financial reporting is critical for scaling.

If you’re a SaaS founder, CFO, or operator, episode #311 will help you properly structure your business model for accurate financial reporting and investor-ready transparency.

What You’ll Learn

• Departments to include in COGS: Tech support, professional services, managed services, customer success (non-sales), DevOps, hardware, and transactional costs.
• Why COGS must be fully burdened (wages, taxes, benefits, bonuses, travel, etc.).
• How to handle allocations when employees wear multiple hats (without overcomplicating your accounting).
• The role of transactional cost centers for usage-based or variable revenue models.
• Why accurate COGS = accurate gross profit, margins by revenue stream, and valuation metrics.
• The importance of following the matching principle under accrual accounting.

Why It Matters

• Finance & Accounting: Accurate COGS sets the foundation for reliable P&Ls and forecasts.
• Investor Metrics: Clean COGS helps investors and acquirers trust your financial systems and data.
• Valuation: Strong, transparent gross profit reporting increases confidence during fundraising or exit planning.
• Business Leaders: Knowing your true COGS drives better decision-making across your revenue streams.

 Resources Mentioned

Blog Post: How to Structure Your SaaS P&L Correctly: https://www.thesaascfo.com/what-should-be-included-in-saas-cogs/

Academy Content: Deep dive into SaaS COGS, OPEX, and financial modeling for SaaS and AI companies: https://www.thesaasacademy.com/the-saas-metrics-foundation

Quote from Ben

“Your SaaS COGS must be fully burdened — labor, taxes, benefits, even pizza parties. That’s how you get accurate gross profit and investor-ready financials.”