You spent your time training and apprenticing to become an electrician. It's likely that you don't have a lot of background in the task of bookkeeping. Your focus has been on learning the techniques of your trade, building your business, and providing safe and reliable service to your customers.
While bookkeeping may not be your specialty, it is necessary for your business. Bookkeeping is vital for helping you understand the financial position of your business and allowing you to make educated decisions about how to grow your operation.
Fortunately, there are a few tips that you can follow which will make the bookkeeping process a significantly easier one, reducing the amount of time and money that you need to spend to keep your books up-to-date.
1. Separate your business and personal accounts
Many small business owners make a common mistake in combining their business and personal accounts together. If you find yourself in this situation, the time has come to separate the two.
This will simplify your bookkeeping process and make it easier for your bookkeeper to categorize your transactions. It will also make it easier for your accountants to identify any tax deductions that you may qualify for. When you separate your business and personal accounts, it makes your business look much more professional and adds credibility to your operation.
2. Use a cloud-based accounting software
Many small businesses use Excel to handle their bookkeeping and accounting needs. Unfortunately, Excel is prone to errors and isn't as efficient as other available programs.
As an electrical contracting business owner, you have projects on the go that will take you and your team all over town. Using desktop accounting software can be problematic if you need to access your financial data while on the go.
It is always best to choose a cloud-based accounting software because it allows you to access all of your numbers at any time, from any location – as long as you have internet access. It also gives you the ability to collaborate with your bookkeepers, accountants, and other team members. Plus, it automatically backs up your financial data each day, ensuring that all of your information stays safe and secure.
Cloud-based accounting software like QuickBooks Online or Xero can help you create job estimates, create and send invoices, send payment reminders, manage your expenses, perform bank reconciliations, all while you are on the go.
3. Keep your books organized every month
Bookkeeping is a task that often gets neglected because it is tedious and extremely time-consuming. However, it is crucial to keep your numbers up-to-date to have clear visibility on your business's cash flow and overall performance.
You need to track all of your receipts and invoices in your accounting software, and if you have any billable expenses for your clients, you need to make sure it is correctly recorded on their invoice.
You also need to ensure that staff costs are allocated correctly. Your delivery team costs should be allocated to Direct COGS, whereas management and office staff costs should be allocated to indirect costs. This will give you a better understanding of your business from a gross margin perspective.
Once a month, you should perform an inventory count of your supplies, and your bank and credit card reconciliations should be completed as well. By doing all of this and keeping track of your equipment depreciation, you will be in a better position to monitor the business's progress and overall profitability.
4. Streamline your expense management process
Electrical contracting businesses usually purchase supplies from vendors and then spend the rest of their time focusing on the installation side of things. You likely have a lot of invoices from different suppliers and need to keep track of your costs to ensure that you can make all of your payments on time.
It is essential to keep track of all the receipts and invoices that your business has collected, but this is often a difficult task to do when you're busy traveling to different job sites. Papers and documents can get lost along the way.
A tool like Dext Prepare can help your company handle all of this expense paperwork with ease. Simply take a snapshot of your documents, and all the important information is quickly extracted, creating a transaction that can then be exported to your accounting platform.
This will save you a significant amount of time on manual data entry and leave an easy-to-follow audit trail. It will also help keep your documents organized while you're on the go so you don’t have to worry about losing receipts.
5. Hire a professional to take care of your books
You probably didn't start your electrician business to become a bookkeeper, and there is a good chance that this isn't your area of expertise. Hiring a professional bookkeeper to do your bookkeeping means you can focus on running your business while also obtaining access to accurate financial records that you can rely on.
Bookkeeping might not be a full-time task, so instead of hiring a full-time, in-house bookkeeper, you may want to consider outsourcing your bookkeeping to a professional. If so, Enkel can help! We have a team of experienced bookkeepers that can assist with payroll, invoicing, collections, paying your vendors, and more.
6. Use a digital payroll software program
Taking care of the team of people that work for you is vital to the health of your business. You need to ensure that they are getting paid accurately and on time.
It will allow you to quickly calculate each pay run, pay employees through direct deposit, and calculate payroll remittances and then have them sent automatically to the CRA, keeping your company compliant with all payroll legislation.
Finding ways to simplify your bookkeeping process will go a long way to saving you time and money, all while giving you access to the up-to-date financial data that your business needs.