Are you a person that has worked for someone else in the construction industry for a while? You’re probably thinking about starting your own construction business and are not sure how to do that. Whether you are a general contractor, handyman, plumber, electrician, HVAC, concrete or landscaping company, this is a big step for you!
There is tons of data that shows the failure rate of startup businesses in the first five years. Many of these startup businesses fail because they haven’t put good procedures in place. Here are five bookkeeping tips for new contractors starting a business.
Tip #1 – Open Multiple Checking Accounts
Many contractors start out using their personal accounts for business making it tough to keep track of expenses. Open three different accounts when you start your contracting business.
Account #1
The first account is going to be your primary checking account and should not have any debit cards attached to it. Only order checks for this account and use this account to transfer funds to your other accounts. This account is your primary account to pay major bills with only. Deposit all your funds into this account and distribute to the other two accounts when needed.
Account #2
This checking account is used to cover your payroll for employees or sub-contractors. Keep a cushion of $500 in this account. This is the account that your payroll company or bookkeeper is going to pull funds from for payroll. This also allows you to prevent fraud. Do not get any credit cards or debit cards for this account. This is only for payroll.
Account #3
This checking account is used for petty cash only! Keep $500 to $1,000 in this account for purchases for your business. This is the account that you will have credit cards, debits cards attached to. This is the account that you would give your forman or employee a debit card to purchase supplies. Make them use your debit card as a credit card always. DON’T EVER GIVE OUT YOUR PIN NUMBER! This will restrict them from withdrawing money from this account at will. They will have to sign for all transactions when used as a credit card. By keeping limited funds in this account, you minimized the risk of fraud here too.
Tip #2 – Go With Quickbooks Desktop Version
There are literally thousands of accounting software solutions these days. The most dominate one is Quickbooks. I have used both the cloud version and the desktop version. We recommend the desktop version for all contractors that are hiring employees. The desktop is more powerful in reporting, and the contractor version is tailored specifically to your industry. We can remote access your desktop version with cloud software making it easier to manage your books.
Tip #3 – Store Your Documents In The Cloud
There are a few good cloud based storage solutions today that sync seamlessly and are easy to use. While Dropbox, Google Drive, and Box are good solutions for file backup, the one that we would recommend to keep sensitive information on is SHAREFILE.
Sharefile has the best track record in the industry and works on any device to store and sync your files seamlessly. You can also send files securely to anyone with HIPPA compliance level security through the whole process.