As a tradie and a business owner, you have to split your time between your business and your customers. With these accounting strategies, you can boost profitability without compromising service.
Tradies are in the service industry.
You’ve built your entire reputation on providing quality work to your clients. Now, you’re building a business based on that reputation.
But this is where many tradie business owners struggle. Right now, you’re in a period of transition. Before becoming a business owner, you only had to worry about the job you did for your clients.
Now, you’ve got to focus on operating a business. That means taking care of employees, handling cash flow, and working through all of the paperwork.
It’s easy for things to fall through the cracks, especially when it comes to accounting. You may keep putting things off for another day and allowing issues to pile up. Or, you may focus so intently on providing the service that you miss opportunities to boost profitability.
That’s where these accounting strategies come in.
Each one will help you to get your trade business in good shape so that you can improve profits.
Accounting Strategy #1 – Digitise Your Financial Records
The quality of your bookkeeping will determine how well you keep your financial records in order. The issue is that many tradies try to handle this side of things manually.
You may be the same. For example, you may issue paper invoices for the work that you carry out. You’ll have to dig those invoices out when it’s time to handle your taxes.
If you’re not well-organised, this can create a massive time burden. And when you have clients to provide a service to, that’s the time that you can’t afford to waste.
Moving to a digital bookkeeping platform may be the solution, as Adam Dovile discovered:
Adam Dovile started his career as a carpenter working for somebody else. But after appearing on House Rules with his wife, his life completely changed.
Now, he’s juggling a trade business and his media appearances. A manual bookkeeping system just wouldn’t work for him anymore.
That’s why he started using a software called MYOB to make things easier. As he puts it:
“I liken doing the books to being on the worksite. If it’s a mess, the job’s chaotic. You’ve got invoices going out, receipts coming in and it can be hard to keep track of everything.”
His electronic platform helps him to centralise all of his financial records. This makes it easier for him to handle his taxes and other accounting issues.
You will have to invest some money to get access to an appropriate platform. But the trade-off is that you’re able to manage your records far more easily.
Accounting Strategy #2 – Track Your Expenses
Every business incurs expenses as part of its operations.
What many tradies fail to do is track all of those expenses. As a result, they’re not able to make as many deductions as they could when it’s tax season.
Tracking your expenses is a simple tip. What you may not realise is just how much stuff you can claim for.
For example, you may know that you can claim for any vehicles that your company owns. But you may not know that you can take things further and claim deductions for every kilometre that you drive in those vehicles.
Your technology also counts as work-related expenses. Any tablets, smartphones, or laptops you use provide you with opportunities to make deductions.
The same goes for all of the equipment that you use to do the job in the first place.
Keep the receipts for everything that you spend money on as part of your business operations. Ideally, you’ll be able to store them in your electronic bookkeeping system so that you have them ready when you complete your taxes.
Accounting Strategy #3 – Separate Business & Personal Funds
There’s a strong temptation to mix personal and business funds in any company. This is especially the case for sole traders, who aren’t required to have separate business bank accounts.
Even if it’s not a requirement, it’s still a recommendation.
When you mix your business and personal funds, you could create an administrative nightmare. That’s because you’re creating questions about what you’re spending money on for business purposes. Somebody could argue that a business purchase is actually a personal purchase.
And if your funds aren’t separate, you may have a tough time disproving the allegation.
Beyond that issue, separating your funds keeps things simple. It means you always know exactly how much money you have to grow the business. Plus, you won’t have to waste time figuring out what’s a business expense and what’s personal when doing your taxes.
Accounting Strategy #4 – Hire an Accountant
The above tips will help you to manage the accounting side of your business a little better. However, they may not help you to get access to every tax benefit that you’re eligible for.
After all, you’re still a tradie first and a business owner second. Because you’re working with customers, there’s only so much time that you can dedicate to the numbers.
If that’s the case, you could benefit from hiring an accountant. You have the option of bringing somebody into the company or working with a third-party.
Ultimately, your circumstances will dictate the decision. Just remember that a full-time hire creates a permanent cost for the business that you need to account for. Working with a third-party usually proves more cost-effective. Plus, it still gives you access to expertise.
Accounting to Drive Profitability
You may see the accounting side of your business as an inconvenience.
However, taking control of it can drive efficiency, which leads to greater profitability. You’ll have a better idea of where your business stands, which means you can take steps to improve things. Plus you’ll be able to claim deductions that you may have missed otherwise.
When operating on fine margins, as many tradies do, those savings could give your business a huge boost.
Would you like to find out more?
If so, contact Bottrell Business Consultants on 02 49 336 888. We’ll arrange a free consultation to discuss any strategies that may help your service business.