Updated: Aug 4, 2020
Keeping track of the financial status is crucial not only for construction firms but also for every industry. There are four key elements that you should keep in mind if you want your business in good financial health.
1. Falling Behind on Accounts Receivables:
When you issue an invoice, a receivable is recorded, meaning that a customer owes you money. Checking your accounts receivable detail report, you'll see which customer's balance is outstanding.
Why does A/R matter? You do not want to be left with a stack of customer deposit sitting in your revenue account and a receivables report that doesn't make sense during tax time.
Tips: Generating monthly receivables reports and balance sheets to have a sense of how your business is doing.
2. Not Recording Cash Expense:
Entrepreneurs must track all expenses to running a small business, so the costs can be subtracted from total income at tax time to keep a better sense of overall profitability throughout the year.
It's easy to overlook expenses paid in cash since credit cards, debit cards, or checks are all liked to QuickBooks. If some expenses are not recorded, missing cash expenses can cause business owners to overstate income for the year. That means you are paying too much in taxes for the year.
Tips: Develop a method for tracking these cash expenditures. Ask for a receipt from the vendor to enter into QuickBooks, take a picture of the receipt, and auto-sync it to QuickBooks without data entry!
3. Not Keeping Expense Receipts:
Failing to save copies of receipts can result in a series of tax, accounting, and cash flow problems. How many times have you looked at your bank account statement and had no clue what that $100 charge is?
Not having an actual receipt that can give you details about the charge can result in incorrectly reported tax expenses and a high tax bill if you’re audited.
Save a receipt of every business purchase
Categorize receipts - Is it supplies, equipment or personal expense you accidentally paid for using your business card?
Only use your business bank or credit card to pay for business expenses
Have an envelope in your bag/car where you can put all your receipts
4. Not Hiring a professional to handle Bookkeeping and Taxes:
Small business owners often try to save money by doing their taxes. You may not claim all the deductions you qualify for, or you might underpay your tax bill—leading to penalties.
Spending the money to hire a professional means you’ll have an expert who knows what they’re doing and apply the right tactics for your financial situation.
Tips: Hire a professional bookkeeper and a tax advisor. They can keep updated on the ever-changing tax laws and help you plan for potential tax hikes.
In sum, the success of your small business depends on the accuracy and organization of your financial paperwork. Keep the 4 tips in mind and grow your business!
If you need any advice or services on any aspects of construction bookkeeping, accounting or tax, our construction accounting specialists are ready to help. Get in touch with us for free quote.