Contractor Update

Contractors and service pros are good at what they do - building, renovating, installing and repairing. Unfortunately, owning a business means you also must be good at business. At Construction Deal.com, our goal is to help your company succeed. So we wanted to help those who might need help with the accounting side of owning a business. This might be remedial for some business owners, but we'll move on to more complicated topics that might provide you with a few tips and tricks.

First, it's very important to keep track of everything that happens with your business. These are called transactions. If you purchase tools, deposit a check, have a truck repaired, pay subs, or pay insurance, you'll need to hold on to receipts and enter the details and amounts in a ledger or computer program. Even if the transaction doesn't include money changing hands -- write it down. For example, if you receive a bill for lumber or you've just sent your bill to a customer and money won't exchange hands until next month.

All these transactions have accounting terms and it's how you can keep track of how well your business is doing. It's a great way to ensure your company will be around for years to come. These terms include income (deposits), assets (tool purchases), liabilities (insurance payments), accounts payable (lumber invoice), accounts receivable (a customer invoice), and more. We'll bring these terms up often as we continue through the process.

Next, it is important to consider your accounting cycle. This refers to the period of time you'll be keeping track of expenses and income. It could be a year, a month, a quarter. You could do it by year, but I recommend not waiting until the end of the year to pull out a big box of receipts. Doing it little by little will prevent those end-of-the-year headaches. Your year doesn't have to be January to December either. It can be from "busy season" to "busy season." Or April to April (tax time.) But whatever cycle you choose, stick with it.

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Labels: Accounting