Construction companies and tradespeople both have difficult jobs requiring long hours, skilled labor, and plenty of liability if the final product isn’t up to snuff. Custom cabinetry companies don’t have the luxury of choosing jobs that aren’t profitable, but job delays, changing materials costs, and surprise tax issues can turn even simple contracts into time and cost-wasting nightmares. Without proper financial oversight and budgeting, enough of these bad jobs can put a cabinetry company out of business—and that’s where bookkeeping comes in.
Bookkeeping for cabinetry companies offers a way to overcome the challenges of variable income jobs, stay compliant with tax regulations, and make informed decisions about the future of the company. Let’s take a look at the importance of bookkeeping for cabinetry companies, including 5 big reasons to start investing in proper bookkeeping.
What Makes Cabinetry Company Bookkeeping Different?
Bookkeeping is the cornerstone of accounting, and it simply means recording your company’s financial transactions into organized accounts for better reference and record keeping. It’s a crucial part of any business, but it’s especially important for cabinetry companies, independent contractors, construction firms, etc., for one big reason—job-based income.
Unlike, say, restaurants and clothing stores, cabinetry companies depend on the income they get from different contracts, some of which can have drastic differences in materials, labor, and fees depending on a wide range of factors. This kind of uncertainty can lead to big gaps between paydays, making it difficult to pay workers on time, cover credit payments, or repair essential tools and other necessities.
Accurate cabinetry company bookkeeping allows for a stable record of your business’s cash flow so you can always see how much money is on hand compared to your debts and expenses. Perhaps even more useful, however, is using this financial record to estimate the expected profits of future jobs—a process called “job costing.” By recording the expenses of materials, fuels, labor, etc. for each job, you can reasonably guess how much a similarly-sized job will cost, meaning you can charge an appropriate amount to ensure a profit.
Cashflow tracking and job costing are crucial reasons accounting is important for cabinetry companies, allowing you to make informed decisions about which jobs are more profitable for your business, recognize major expenses, and find potential cost-saving opportunities.
5 Reasons Why Bookkeeping Is Important for Cabinetry Companies
We’ve already gone over a few of the benefits of good cabinetry company bookkeeping, but there are plenty more. Here are five specific reasons why you should be investing in proper bookkeeping for your company.
1. Labor Tracking
Your labor force might include a combination of salaried employees, union and nonunion workers, and independent contractors. These employees might work different hours at different rates, and tracking labor hours across multiple projects can become disorganized at best. There are web-based tools and other job site-focused systems to help you keep track of hours, but combining payroll with bookkeeping is a surefire way to make sure your workforce gets paid what they’re owed on time, and you aren’t left dealing with any surprise figures on payday.
2. Tax Compliance
Good record keeping allows for accurate tax calculations, ensuring there are no surprises when it comes to your tax bill and protecting you in the case of audits. Whether you file taxes yourself or enlist the help of small business accounting services, all income, expenses, and other information must be accounted for. Certain tax breaks or other beneficial accounting tools might only be available if you can prove you qualify for them, and even the best accountants need good records to ensure you’re saving as much as you can when you file.
3. Accurate Financial Reporting
Bookkeeping provides important financial documentation, including the “big three” for measuring a company’s health: income statements, balance sheets, and cash flow statements. Reporting income is crucial for tax reasons and also allows managers to see the gross income for each quarter or financial year, allowing stakeholders to gauge business success and see trends in which times may be more profitable. Meanwhile, reporting expenses allows for an internal audit of where income is being spent and areas where costs could be cut to improve the bottom line.
4. Budget Planning And Management
We’ve already gone over job costing, but bookkeeping for cabinetry companies allows for more in-depth financial planning than just upcoming jobs. Strong estimates about the financial future of the company allow for long-term investment strategies. For example, maybe you’ve been considering opening up a new branch somewhere in town. Proper budgeting and financial management can tell you how much revenue that branch would need to make to be economically viable. Whether or not you can expect the kind of funding to finance something like that with your current business projections.
5. Improved Decision Making
The confluence of all these different factors results in improved, data-backed decision-making for your business. For instance, maybe you’ve come to learn that the winter months require more fuel to get from job site to job site because of increased snowfall. Even though you’re just as busy as in warmer months, you’re making less revenue for the same amount of work. With proper bookkeeping, you’ll know exactly how much you’ll need to adjust your price, or, on the other hand, you can avoid taking jobs that require longer travel times. It all comes down to having the data on hand to justify your decision for the good of your company.
Bookkeeping Tips for Your Cabinetry Company
There are plenty of simple ways to improve your company’s bookkeeping. Start by writing down every transaction you make in a dedicated journal or ledger, and save the receipts for every business expense so you can go through later and “reconcile” each transaction—check that what’s written in your journal and what’s written on the receipt match. Avoid paying for business expenses in cash as these purchases are harder to track later.
Once you have a clear picture of your expenses, stay on top of your invoicing so clients are more likely to pay you on time. Then, set aside some time every week, month, or quarter to spend time with your books, adding up unforeseen expenses like repair bills or fees and ensuring that all of your accounts receivable have been paid. Comparing these two figures will give you an idea of your cash flow at that given moment.
However, even with an appreciation for the importance of bookkeeping, many construction professionals find it difficult to keep on top of their books and run the day-to-day operations of their business at the same time—especially when work itself can be so demanding. In these cases, cabinetry company owners should consider hiring professional bookkeepers to handle their accounts, provide financial statements, ensure tax compliance, and more.
Investing in the services of professional bookkeepers can free up time to pursue contracts and provide quality work while ensuring you still reap the benefits of proper accounting. If you’re in the construction or trades industry, contact Appletree Business Services to meet with one of our qualified business consultants. We have over 40 years of experience helping small to midsize cabinetry and construction companies realize their potential with bookkeeping, payroll, and tax services so you can focus on what you do best—providing quality work for your clients. Call today!