10 Bookkeeping Tips for Contractors

10 Bookkeeping Tips for Contractors

Bookkeeping can be one of the most difficult aspects of running your own contracting business. Maintaining accurate records of financial transactions ensures that your business functions efficiently and transparently. These ten tips will help to make bookkeeping as simple as possible.

1. Use Different Checking Accounts

One of the easiest ways to keep track of expenses and profits is to maintain separate checking accounts. To do this effectively, you should have at least three different accounts, with each account serving its own purpose. One account will serve as the account where you deposit all of the money you’ve earned. From there, you will transfer money to other accounts as needed. The second account should be for payroll purposes only. The third account serves as a petty cash account. This allows you to always see how much cash you have on hand and ensures that you aren’t robbing Peter to pay Paul.

2. Keep Track of Receivables

By carefully entering every payment you receive from customers, you will always know who is paid up and who is late. Without these vital records, you can lose track of who owes you what.

3. Create a Business Plan

A solidly formed business plan helps you to know the direction you’re heading in. By setting up goals you’ll know exactly how much work you need to do meet them. Setting out a marketing strategy for you company can help you become more profitable.

4. Keep Backups of Your Records

Advances in technology have made it simple and easy to store backups of your documents. Cloud-based technology offers nearly unlimited storage capabilities at affordable prices. By keeping backups in the cloud, you’ll make sure that your contracting business will have access to the information it needs to function no matter where you happen to be.

5. Use Accounting Software and Applications

Once again, technology steps in to save the day. Use computer software and apps like Quickbooks to keep track of expenses, receivables, taxes and more. Quickbooks is easy to learn and is a cost-effective way to keep your accounting practices in order.

6. Keep Track of Expenses

As a contractor, it can be easy to lose track of what you’re spending in supplies while on a project. Keep all of your receipts and enter them into your books on a regular basis so that you can keep project costs under control and finish the job with a profit.

7. Hire a Professional Accountant

When you own a contracting business, taxes can get pretty complicated. The best way to avoid any complications during tax season is to hire a professional to do the job for you. An accountant can help you maximize deductions and ensure that you’re paying exactly what you owe.

8. Keep Track of Bills

Running a business costs money. When you sit down to record receivables and expenses, make sure you’re tracking your bills too so you don’t have to worry about having your electricity or phone service shut off.

9. Outsource Bookkeeping

Hiring an outside bookkeeping company can help ease the burden of organizing your books. Many companies offer a variety of services, from organizing your paperwork to taking full control of your company’s books.

10. Keep Track of Job Profitability vs. Job Costs

Make sure you’re working efficiently and cost effectively by balancing out your job profits and job costs. As your business continues to grow, you’ll find that you learn which jobs give you the most profit and which ones probably aren’t worth your time.