For any contractor who is considering starting their own business, setting up a bookkeeping system is vital. Managing income, expenses, and taxes are mandatory. If you have employees, their hours and paychecks, along with client invoicing, are at the core of your business.
Tracking expenses and income
The first bookkeeping step is to track income and expenses. For a small contractor, it may be as simple as keeping receipts in a file folder. However, an actual tracking system will make things easier and more efficient. A basic setup should include categories for accounts payable, accounts receivable, and job costs. Accounts payables consist of bills and expenses paid by the contractor. This may include building rent, utility bills, and vehicle costs.
Accounts receivable includes invoices paid by the client to the contractor. Job costs are the expenses related to materials, tools, and employee payroll. Each item in all three categories should be marked with a date and a description to ensure that your bookkeeping data are well-supported with the necessary information to help you track down the expenses. When spending money from a business account, it is wise to use paper checks. Numerical check stubs can facilitate keeping track of when and to whom checks are being sent.
If you are using online banking, a dedicated checking account or credit card will be useful in keeping up with business expenses. When invoicing, a two-part invoice book will allow you to keep a copy of every sent invoice for your records. If you have an inventory, keep a thorough list that can be updated as materials are used for projects. Don’t forget that each step is important so your bookkeeping efforts will not be wasted.
Many contractors and businesses choose to avoid paper tracking altogether in favor of a computerized system. Excel spreadsheets are the most basic way to track income and expenses. Spreadsheets can be set up to perform a variety of calculations.
A spreadsheet file can be synced to a cloud-based server such as Google Drive or OneDrive to allow for access from anywhere. However, a great deal of skill is required to properly manage a spreadsheet for a large business, or for complex projects. A good alternative is Quickbooks, which is an accounting program available in several tiers to suit the size of your business. Whether a self-employed contractor or large multi-employee business, they offer some solid software options.
The software combines expense and income tracking, invoicing, and inventory management into a user-friendly interface. The program also features mobile apps for smartphones. With these, you can manage your business on the go. QuickBooks can connect to online banking and credit card accounts and automatically log transactions into their system. Many popular bid estimate and project management programs can export their data into QuickBooks. This allows for seamless integration between bidding and billing.
Hiring a professional bookkeeper
If managing a business, especially one with employees or many long-term projects, your focus should be on getting each job completed in a timely manner. When you must spend time entering receipts and checks into a computer, your attention is drawn away from the real work.
A professional bookkeeper may seem like an expense you cannot afford, but they often save you money by helping you get every tax break legally allowed. They also help you maintain accurate records so that you don’t have to worry about erroneous tax payments. Making mistakes on your taxes can be painful and expensive. A good bookkeeper will make sure things are done correctly and on time. In addition, a professional will ensure every employee is paid on time, every client is invoiced quickly, and every bill and fee is paid. This can help you avoid late charges.
Electrical contracting can be financially complex, with long-term projects, employee wage increases, tax and benefit deductions, and others. With such a variety of suppliers, sub-contractors, and clients to manage, an electrician can greatly benefit by hiring an expert to handle finances. In addition, this eliminates a major portion of your work and worry each week so you can focus on building your business.