DOCUMENTATION
Hello everyone! It’s time again for me to write and this time I want to discuss bookkeeping for the trades. This group of businesses has special needs when it comes to their bookkeeping and payroll. Exceptional bookkeeping for any business includes accurate data entry (or digital importing) of sales and expenses. This is key for if these elements are not correct, the rest of the bookkeeping, like HST calculations, source deductions, bank reconciliations etc., and the reports that are generated are useless.
WHAT’S SO SPECIAL ABOUT BOOKKEEPING FOR THE TRADES?
Bookkeeping for the trades requires a higher level of detail in order to generate accurate and meaningful reports. If you only record sales and expenses without any allocations, you are not getting the full picture. What do I mean by allocations? Well, each and every sale should be recorded by the customer. So no matter which accounting platform you use, each customer must have their own ‘file’. Other than invoicing your customer, the next important step is entering expenses and assigning them to the customer for which they were purchased. For instance, if you are building a deck and need to buy lumber, when the expense for the lumber is entered into the accounting software it needs to be tagged as to which customer you purchased this item for. This will later facilitate a report which will show you how much profit you made on each client. This is so important to know. Imagine not knowing if a job is profitable or if you lost money on it! This will help you make future decisions how to quote your jobs.
Likewise, if you have employees, it’s important that their time be allocated to the customer whom they are working on. A profit and loss by job report that does not include labour costs will be deceiving and make you believe that you are performing better than perhaps you actually are. Payroll is the biggest expense in your business so it shouldn’t be left out!
WSIB
Many business owners assume that WSIB premiums do not apply to them as the owner. If you work in construction of some sort, this is not the case. If you are a sole proprietor and only work on residential jobs, you do not require WSIB insurance. However, some sort of business insurance is recommended. Likewise, if the business owner is NEVER on a job site, but rather is only involved in sales, quoting etc, then no WSIB insurance is needed. This scenario is rare. In most cases, it is best for insurance premiums to be paid on the owner’s salary. It is also important to note that your invoices should be broken out into both ‘parts and labour’ since WSIB premiums are not applicable to parts. You don’t want to pay more than you need to! For more information on what is required of you and your business, click here.
GET THE HELP YOU NEED FOR YOUR BOOKKEEPING IF YOU ARE IN THE TRADES
There is a lot of work involved in keeping the financial information of a business organized, up to date and compliant. This is even more true with a construction or trade business. If you don’t have time to do it yourself or don’t know how to do it, please hire a qualified bookkeeper or accountant to help! You’ll be glad you did! Click here to learn why you need a qualified bookkeeper on your team!
