CEOBOOKS & TAXScope call

Accounting for AI companies

Gross margin that
counts the compute.

An AI company's numbers break in places a standard SaaS chart of accounts doesn't reach: inference costs sitting in R&D, cloud credits hiding the real cost to serve, prepaid usage booked as revenue the day it's bought. We run the books so gross margin, deferred revenue and the R&D credit reflect how the product actually works.

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What we set up and run

  • Inference, hosting and third-party model API costs in COGS, split from training and experimentation in R&D
  • Cloud and GPU credits tracked by provider, with gross margin shown before and after credits
  • Prepaid usage and credit packs held as deferred revenue, recognized as customers consume them
  • Minimum commitments, overages and true-ups recognized under ASC 606
  • Cost to serve by customer and by model, so pricing starts from contribution margin
  • Capitalized software under ASC 350-40 where platform development qualifies
  • The R&D credit (§41) and §174A treatment for model development, including qualifying cloud compute
  • Sales tax taxability reviewed state by state for SaaS and API products

When the credits run out, gross margin moves. Reporting both numbers now means the board sees it coming and the pricing plan accounts for it.

Usage-based and credit-based revenue under ASC 606

Usage pricing changes when revenue is earned. We write these answers into a revenue policy, then apply it every month.

  • Prepaid credit packs held as a contract liability until they are used
  • Breakage on unused credits recognized on the pattern of use, or when use becomes remote
  • Minimum commitments with overages recognized across the contract term
  • Platform fees and usage assessed as separate or combined performance obligations
  • Billings, recognized revenue and ARR reconciled when usage swings month to month

A written policy keeps the treatment consistent from month to month and gives an auditor something to read.

Questions founders ask

Is inference compute COGS or R&D?

Compute that serves customers in production belongs in cost of revenue. Compute for training and experiments that build the next model is generally research and development. We split it by workload with a documented method, so gross margin means the same thing every month.

How do we account for cloud and GPU credits?

Promotional credits from a cloud provider aren't revenue, and the usage they cover often never shows up as an expense, which flatters gross margin. We track covered usage separately and report margin before and after credits.

How is prepaid usage recognized under ASC 606?

Cash received for credits or tokens a customer hasn't used yet is deferred revenue. Revenue is recognized as the credits are consumed, and expected breakage on unused credits is recognized in proportion to the pattern of use when it can be estimated.

Does model development qualify for the R&D credit?

Often. Work that resolves technical uncertainty through experimentation can meet the §41 four-part test, and amounts paid for cloud computing used in qualified research can count as qualified research expenses. It depends on the work and the records, so we review it with you before claiming anything.

From the library

More for SaaS and AI founders

  • Fractional CFO: Forecast, burn and runway, board and investor reporting, unit economics and funding readiness.
  • SaaS bookkeeping: GAAP books on accrual, automated reconciliations, deferred revenue right, closed every month.
  • Tax preparation: Federal and state returns, Delaware franchise tax, the R&D credit and sales tax nexus.
  • Startup accounting: The accounting a venture-backed startup needs at each stage, and a monthly close that keeps it diligence-ready.
  • R&D tax credit: The §41 credit studied, documented and claimed, the payroll tax election for young companies, and §174A on the return.

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