Bookkeeping for Contractors
Are you a growing contractor who is eager to scale your business? If so, this article is for you.
Key Takeaways:
Start bookkeeping if you have not already for the sake of growing your business
Consider more advanced forms of accounting for contractors as you grow
Your business's finances are key to its success and growth. While this may seem obvious, many small contractors often overlook this part of their business. To be fair, contractors are busy juggling many tasks and are usually focused on getting the job done and finding more work. However, it’s important for business owners to have accurate financial information and review it regularly. This helps them make smart decisions and grow their business the right way.
What if I told you that you could reduce your administrative work and spend less time on daily tasks, so you can focus more on finding new clients?
The fastest way to grow your business is by having accurate financial information, understanding it properly, and using that information to make smart business decisions.
The Basics
When you’re just starting out or running a small business, basic bookkeeping is enough.
So, what does basic bookkeeping look like for most contractors?
It’s simply recording and organizing your business’s financial transactions, like income, expenses, and payments, to keep your financial records up to date.
For smaller businesses, bookkeeping is usually done on a cash basis. This means you count income when you get paid, and you record expenses when money leaves your account. Basic bookkeeping gives you a simple overview of how your business is doing and is important for filing accurate tax returns.
If you need help with basic bookkeeping or want to know how much it might cost, feel free to schedule a free consultation.
Advanced Accounting
As your business grows and you have more employees working on different projects at the same time, job costing becomes really helpful.
So, what is job costing?
Job costing is a way of tracking all the costs for a specific project, like labor, materials, and other expenses, so you can figure out if the project is profitable and price it correctly.
Job costing becomes valuable at this point because it gives you more detailed financial information to make better business decisions.
Here’s an example:
Joe owns a roofing company with 12 employees, split into 4 teams of 3 people each. Joe started using job costing at the beginning of the year. After two months of tracking his projects, Joe noticed that one of his teams was taking twice as long to finish a roof compared to the others. Since labor costs are a major expense, this team’s slow progress meant Joe’s profit on that roof was half as much as the others. Now, with this information, Joe can make better decisions moving forward. Before, he didn’t have the time to track his teams in this way because he was busy with clients and other tasks.
This kind of insight can be valuable in many situations. The main benefit of keeping accurate financial records and tracking individual projects is that it helps you make decisions that can speed up your business growth.
Unfortunately, many business owners—contractors included—don’t have access to this type of information. Without it, they waste years trying to reach their growth goals. What we’re talking about here is accounting data that helps you make smart business decisions as your business grows and affects more people.
Are you overwhelmed by the amount of the administrative tasks involved with running a business?
I completely understand if that’s how you feel. Starting my own accounting firm as a solo entrepreneur has shown me just how many tasks are involved in running a business. Recently, I’ve started outsourcing some of the administrative work so I can focus more on clients and their needs.
If bookkeeping and payroll are things you really don’t enjoy (like many contractors I’ve worked with), think about outsourcing those tasks. It will save you time and help ensure accuracy. If you're curious about the cost, feel free to schedule a free consultation.
Peyton Witt, CPA
Owner, Tax Pilot, LLC
Expert Tax & Bookkeeping for Trades and Small Businesses
www.taxpilotllc.com