Should I Code Wages and Benefits to COGS | SaaS Metrics School | COGS

Описание: Welcome back to another episode of SaaS Metrics School with Ben Murray, The SaaS CFO! Today, I’m answering a common question I receive from SaaS founders, CFOs, and finance teams: Should we have fully burdened expenses in our COGS department? More specifically, should wages and benefits be coded to COGS (Cost of Goods Sold)?

Understanding COGS in SaaS

COGS (also referred to as Cost of Revenue or Cost of Sales) represents the direct costs associated with delivering your SaaS product or service to customers. Properly classifying expenses in your SaaS P&L is critical for calculating accurate Gross Profit and Gross Margins by revenue stream. But where do wages, benefits, taxes, and bonuses fit into the equation?

Which Departments Belong in COGS?

For pure-play SaaS companies, the departments typically categorized under COGS include:
✅ Tech Support – Inbound support, bug reports, troubleshooting customer issues
✅ Professional Services – Setup, configuration, training, onboarding (from a few hours to multi-month implementations)
✅ Customer Success (If They Don’t Sell) – Product adoption, customer training, retention
✅ DevOps – Hosting, security, compliance, production-facing infrastructure

Why Fully Burdened Cost Centers Matter

Yes! You should code wages, benefits, taxes, and bonuses to the appropriate COGS department. Every cost associated with these teams should be classified correctly. Expenses should follow the people!

🚨 Key Takeaways:
✅ Fully burdened cost centers improve SaaS analytics and profit calculations
✅ Wages, benefits, and taxes should be coded directly to the department
✅ Software, travel, training, and even office pizza parties should be categorized correctly
✅ Contractors should have separate GL accounts to track impact on costs

COGS vs. OpEx: What’s the Difference?

While COGS is above Gross Profit, OpEx (Operating Expenses) is below and includes:

R&D – Engineering, software development

Sales & Marketing – Sales teams, demand generation, advertising

G&A – Finance, HR, legal, admin

Final Thoughts

Accurate SaaS financial reporting starts with correct cost allocation. Properly categorizing wages, benefits, and contractor expenses helps calculate true gross margins, evaluate efficiency, and improve SaaS unit economics.

💬 Drop a comment below if you have questions on COGS vs. OpEx in SaaS!

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