8 Essential Bookkeeping Tips for General Contractors - Photo by Andrea Piacquadio

8 Essential Bookkeeping Tips for General Contractors

Bookkeeping is not a one-size-fits-all solution. If that’s how you’ve been approaching your books thus far, it might explain why you’ve encountered some hiccups.

Contracting businesses are unique, and their bookkeeping should reflect that. These 8 essential bookkeeping tips for contractors will help you to navigate your finances with ease, allowing you to focus on doing what you do best.

1. Establish a Separate Business Account

Mixing business and personal funds gets messy, to say the least.

Setting up a separate business account is crucial for general contractors to maintain clear boundaries between personal and business finances. By doing so, contractors can accurately track income and expenses related to their business, making tax preparation much simpler. 

Having a separate account also provides a clear picture of the business’s financial health and ensures that personal funds aren’t inadvertently used for business expenses (or vice versa), helping to maintain financial stability. 

2. Keep Track of Every Expense

Keeping meticulous records of all expenses is essential for general contractors to monitor their finances and maximize tax deductions accurately. 

Whether it’s materials, subcontractor payments, or equipment purchases, every expense should be documented. Utilizing accounting software or apps can streamline this process, making it easier to categorize expenses and generate reports for tax purposes.

Because let’s face it – bookkeeping for plumbers, HVAC technicians, and other contractors tends to be one of the most dreaded tasks of the job. If making use of technology can help to reduce that dread, we’re all for it.

3. Implement a Consistent Invoicing System

Money makes the world go round, right? A consistent invoicing system ensures that general contractors get paid promptly for their services. 

This includes issuing invoices promptly, clearly outlining services rendered, and setting clear payment terms. Using accounting software can automate the invoicing process, sending reminders for outstanding payments and tracking invoice statuses, thereby improving cash flow and reducing the risk of late payments.

4. Regularly Monitor Cash Flow

Cash flow is king when it comes to running a successful contracting business. Regularly monitoring cash flow is essential for general contractors to ensure they have enough liquidity to cover expenses and take advantage of growth opportunities. 

By tracking cash inflows and outflows, contractors can identify potential cash shortages in advance and take proactive measures to address them. This could involve negotiating better payment terms with clients, reducing unnecessary expenses, or securing lines of credit.

If cash flow has got you down, explore some more ways to take control of your cash flow here.

5. Set Aside Money for Taxes

Benjamin Franklin wasn’t lying when he said: “In this world nothing can be said to be certain, except death and taxes.”

General contractors should set aside a portion of their income for taxes to avoid financial strain when tax time comes around. Calculating estimated taxes based on income and expenses can help contractors avoid surprises and penalties. 

Consulting with a tax professional can provide valuable insights into tax-saving strategies and ensure compliance with tax laws and regulations.

6. Reconcile Bank Statements Monthly

There’s nothing worse than putting off an annoying task until it grows into a huge, daunting responsibility. That applies to reconciling bank statements, but it’s not the only reason to tackle it monthly.

Monthly bank statement reconciliation is crucial for ensuring the accuracy of financial records and detecting errors or discrepancies. By comparing bank statements with accounting records, contractors can identify missing transactions, bank errors, or unauthorized charges. This process helps maintain the integrity of financial data and ensures that financial reports reflect the true financial position of the business.

7. Plan for Growth and Expansion

Stagnancy is nobody’s friend, right? That said, growth doesn’t usually happen spontaneously. It requires strategy and planning.

Planning for growth and expansion is essential for general contractors looking to scale their business. This involves creating a budget, forecasting future revenue and expenses, and identifying investment opportunities. By developing a strategic growth plan, contractors can allocate resources effectively, mitigate risks, and seize new expansion opportunities.

8. Seek Professional Help When Needed

Let’s say, for example, you’re an electrician. Electrical work is your specialty, and you do it extremely well. Accounting and bookkeeping, however, may not be your forte.

The same could be said for us. We’re pros (literally!) when it comes to the books, but we don’t have a clue what it takes to do quality electrical work. Just like we wouldn’t start messing about with wires, it’s probably best if you avoid fiddling around with your finances if you’re not confident in what you’re doing.

General contractors should not hesitate to seek professional help when it comes to complex financial matters. Hiring an accountant or bookkeeper can save time, reduce stress, and ensure compliance with tax laws and regulations. Outsourcing bookkeeping tasks also allows contractors to focus on core business activities while leveraging the expertise of financial professionals. So, no more fiddling!

Not sure if it’s the right time to outsource your bookkeeping? This blog might help.

If outsourcing is the right call, that’s where AIS Solutions comes in. Our specialized bookkeeping services cater specifically to contractors, including bookkeeping for plumbing businesses, HVAC bookkeeping services, and all other sorts of contracting businesses. 

Let AIS Solutions handle your bookkeeping needs, allowing you to focus on growing your business. Contact us today to learn more about how we can support your contracting business.

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