Setting Up Business Accounting for Home Service Contractors
Setting Up Business Accounting for Home Service Contractors
Proper accounting is the foundation of a successful home service business. Whether you're a sole proprietor plumber or growing HVAC company, tracking your finances correctly helps you understand profitability, prepare for taxes, and make informed business decisions.
This guide walks you through setting up a simple but effective accounting system using popular software options designed for small businesses.
Step 1: Choose Your Accounting Software
Our Recommendation:
For most home service contractors, QuickBooks Online Simple Start ($15/month) provides the best balance of features and industry acceptance. If you're just starting out and want something simpler, FreshBooks Lite ($4.50/month) is an excellent choice.
Step 2: Set Up Your Chart of Accounts
Your chart of accounts organizes all your financial transactions. Here's a basic structure for home service businesses:
💰 Income Accounts
- Service Revenue
- Parts/Materials Sales
- Emergency Service Revenue (if you charge premium rates)
💸 Expense Accounts
- Materials & Supplies
- Vehicle Expenses (gas, maintenance, insurance)
- Tools & Equipment
- Insurance (liability, workers comp)
- Licensing & Permits
- Marketing & Advertising
- Office Expenses
- Professional Services (accounting, legal)
- Phone & Internet
🏦 Asset Accounts
- Business Checking Account
- Tools & Equipment (depreciated)
- Vehicle (if owned by business)
- Accounts Receivable (money owed to you)
📋 Liability Accounts
- Accounts Payable (money you owe)
- Credit Cards
- Loans (equipment, vehicle)
- Taxes Payable
Step 3: Connect Your Bank Accounts
1. Open a Business Bank Account
If you haven't already, open a dedicated business checking account. This keeps personal and business expenses separate, which is crucial for taxes and business analysis.
2. Connect to Your Accounting Software
Both QuickBooks and FreshBooks can automatically import transactions from your bank account, saving hours of manual entry.
3. Set Up Transaction Rules
Create rules to automatically categorize recurring transactions (like monthly insurance payments or fuel purchases).
Step 4: Establish Your Invoicing System
Essential Invoice Information:
- Your business name, address, and license numbers
- Customer name and service address
- Detailed description of work performed
- Parts used (with markup clearly shown if required by law)
- Labor charges and hours
- Payment terms (Net 15, Net 30, etc.)
- Accepted payment methods
💡 Pro Tip:
Set up automatic payment reminders in your software. Most customers aren't trying to avoid payment – they just forget. Gentle reminders can significantly improve your cash flow.
Step 5: Track Key Financial Metrics
📊 Monthly Revenue
Track total income and trends month-over-month to understand seasonality and growth.
💰 Profit Margins
Calculate gross profit (revenue minus direct costs) and net profit (after all expenses).
💳 Outstanding Invoices
Monitor accounts receivable to ensure prompt payment and identify problem customers.
🚗 Vehicle & Equipment Costs
Track these major expense categories separately to understand true job costs.
Step 6: Prepare for Tax Season
Monthly Tasks:
- Reconcile bank accounts
- Review and categorize all transactions
- Update accounts receivable
- Save receipts for cash purchases
Quarterly Tasks:
- Review profit & loss statements
- Calculate estimated tax payments
- Review expense categories for tax planning
Annual Tasks:
- Generate year-end financial reports
- Compile tax documents (1099s, etc.)
- Consider meeting with a tax professional
Integrating with Other Business Tools
Your accounting software should connect with other business tools you use:
CRM Systems
Both QuickBooks and FreshBooks integrate with popular field service software like Jobber, ServiceTitan, and Housecall Pro.
Payment Processing
Enable online payments through your invoices to improve cash flow and reduce collections effort.
Expense Tracking Apps
Use mobile receipt scanning apps that sync with your accounting software for easy expense tracking.
Ready to Set Up Your Business Systems?
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