3 Pillars of Bookkeeping With Luke Holcomb
In a recent live masterclass in our Facebook group Advice2go for Contractors and Landscapers USA, Luke Holcomb from Apparatus Contractor Services joined us and shared the 3 pillars of bookkeeping for all contractors and landscapers.
Luke started as a contractor at 19 and eventually established his own construction company. He later was able to sell his business in part due to how well he kept his books. He now consults and helps other growth-minded construction companies.
He finds that most contractors are incredibly passionate and skilled in their trade, but have plenty of room for business management growth. In this video, you’ll 3 essential financial components of running your own business. Here’s an overview:
1. Bookkeeping for contractors and landscapers
It’s essential to set up your bookkeeping system specifically for your business. The National Association of Homebuilders has some useful resources to help you get started.
You also want to make sure that you list out all your products and services and set up customers correctly in your system.
Luke discusses why it’s crucial to create a place in your books to attribute your overhead and expenses. When you buy supplies, make sure you book your costs to your customer and your overhead account. This way, you can create a break-even analysis, determine your overhead each month, and see your profit on each project.
2. Payroll management when you’re the boss
Luke strongly recommends you avoid 1099s and set up payroll properly from the beginning. The key benefits of establishing a payroll system are that you can scale your company more easily as you grow. You’re also set up with workman’s comp codes and be better prepared if you end up being audited.
3. The 5 reports you need to know about
Finally, Luke goes into 5 key reports all business owners should know. They all provide more precise insight into your business’s health and empower you to make more informed decisions.
Profit/loss statement for the overall business
This document shares how much money came in and out of your business for a given period. It could be for a week, a month, or a year.
Profit/loss statement per project
This more granular report allows you to see how much you spent and earned on any given project. This information can help you make valuable decisions because it shows you what types of jobs earn you the most. It also lets you see what clients are potentially causing you to lose money.
By analyzing this information, you can decide to leave behind troublesome clients and seek out jobs that will earn you a more significant profit.
With this information that’s already available in your Invoice2go app, you’ll be able to see at a glance who owes you money and for how long. You’ll be able to follow up with customers and improve your cashflow.
Quickly see who you owe money, including loans, bills, and all other outgoing expenses.
While Luke mentions that you will likely not use this report as often, it’s essential to have it available. The balance sheet shares your assets’ total value versus liabilities – so you know exactly how much your business is worth right now.
By learning how to manage your books better, you position yourself to save money, work on projects that earn you more, and have more peace of mind about your business’s health. Be sure to watch the video with Luke to get all the details.