Do I Really Need a Bookkeeper for My Small Contracting Business?
For many small contractors, bookkeeping starts as something they plan to handle themselves and slowly becomes another task that gets pushed aside. A bookkeeper is not necessary for every business from day one, but once the books start falling behind, tax season becomes stressful or you are no longer sure how profitable the business actually is, professional bookkeeping can make a big difference. Keeping accurate, current books gives you a clearer picture of your business and more time to focus on the work that actually brings in revenue.
If you are a contractor running a handyman business, plumbing company or other home service business, you have probably asked yourself this question:
“Do I really need a bookkeeper, or can I just do it myself?”
The answer depends on your situation, but in my experience, many contractors wait longer than they should before outsourcing their bookkeeping.
Most contractors do not start their business because they love categorizing transactions, reconciling bank accounts or reviewing financial reports. They start their business because they are skilled at their trade and want to serve customers.
The problem is that bookkeeping often gets pushed aside until it becomes a much bigger problem.
Why Many Contractors Eventually Hire a Bookkeeper
Many contractors come to us for one of three reasons:
They have fallen behind on bookkeeping.
Tax season has become stressful.
They want to know whether they are actually profitable.
One of the biggest challenges we see is contractors relying on their bank balance to judge the health of their business.
A healthy bank account does not necessarily mean a profitable contracting business.
Without accurate bookkeeping, it is difficult to know:
How much profit the business is generating
Whether revenue is increasing or decreasing
Whether expenses are under control
Whether the business is moving in the right direction
That is where having consistent monthly bookkeeping for contractors becomes valuable. Instead of waiting until something goes wrong, you have financial information you can actually use throughout the year.
The Real Cost of Waiting Until Tax Season
One of the most common misconceptions about bookkeeping is:
“I will deal with it when tax season comes.”
Unfortunately, that is often when contractors discover how much work has accumulated throughout the year.
Waiting until tax season can create several problems:
Missing or uncategorized transactions
Difficulty identifying deductible expenses
Increased stress for both the contractor and tax preparer
More time spent cleaning up old records
Less confidence in the accuracy of financial reports
Keeping bookkeeping current throughout the year makes tax season significantly easier and less stressful.
And if the books have already fallen behind, catch-up and clean-up bookkeeping can get the records back in order before moving into a regular monthly bookkeeping routine.
A Common Story We See
A contractor came to us after falling behind on bookkeeping for more than a year.
Like many contractors, he spent most of his time managing jobs, serving customers and keeping work flowing. Bookkeeping always seemed less urgent and was pushed to the bottom of the priority list.
When tax season arrived, things became much more difficult.
His records were incomplete, transactions were not properly categorized and the accounts had not been reconciled. Personal and business expenses were mixed together, making it difficult to determine what the business was actually earning.
The biggest issue was that he was making business decisions based on his bank balance.
If there was money in the account, he assumed the business was doing well. If the balance dropped, he assumed something was wrong.
After we cleaned up the books, reconciled the accounts and organized everything properly, the numbers told a much clearer story.
Some months were more profitable than expected. Other periods were generating far less profit than he realized.
For the first time, he was making decisions using accurate financial information instead of assumptions.
The Most Common Bookkeeping Mistakes Small Contractors Make
Most bookkeeping issues do not happen because contractors are careless.
They are usually busy running their business.
Mixing Personal and Business Expenses
Combining personal and business spending makes bookkeeping more difficult and can create confusion when reviewing financial reports.
Keeping business activity separate also makes it much easier to understand what the business itself is actually spending.
Not Reconciling Bank Accounts
Without regular reconciliations, it is easy for errors and missing transactions to go unnoticed.
A transaction appearing in QuickBooks does not automatically mean the books are accurate. The accounts still need to be reconciled against the actual bank and credit card statements.
Categorizing Everything as Supplies or Miscellaneous
Overusing broad categories can make financial reports less useful and reduce visibility into where money is actually being spent.
The point of categorizing transactions is not just to get them out of the bank feed. The categories should make sense and produce financial reports that tell you something useful about the business.
Recording Owner Transactions Incorrectly
Owner draws and owner contributions are often recorded incorrectly, which can affect the accuracy of the books.
This is another area where trying to “just pick a category” in QuickBooks can create problems that eventually need to be cleaned up.
Does My CPA Not Already Handle This?
Many contractors assume their accountant and bookkeeper perform the same role.
While there can be some overlap, they typically serve different purposes.
A CPA often focuses on tax preparation and tax planning.
A bookkeeper focuses on maintaining accurate financial records throughout the year.
Think of it this way:
Your CPA can only work with the information they receive.
If the bookkeeping is inaccurate or months behind, additional work may be needed before those records are ready for tax preparation.
Bookkeeping and tax preparation work best together, not as replacements for each other.
When Should a Small Contractor Hire a Bookkeeper?
My opinion is that most contractors should hire a bookkeeper earlier than they think.
You do not need to wait until you are a large company.
If bookkeeping is taking more than a couple of hours each month, consistently getting pushed to the bottom of your list or leaving you unsure whether the numbers are correct, it may already be time to consider outsourcing it.
The goal is not simply to save time.
The goal is to keep the books accurate, current and useful for making business decisions.
For a contractor who would rather spend those hours on jobs, customers and running the business, outsourcing QuickBooks Online bookkeeping can also free up time for work that actually generates revenue.
The Biggest Misconceptions About Bookkeeping
“It Is Just Data Entry”
Modern bookkeeping involves much more than entering transactions.
Accurate categorization, bank and credit card reconciliations and financial reporting all contribute to producing reliable financial information.
Simply having transactions inside QuickBooks does not mean the bookkeeping is complete.
“I Will Do It When Tax Season Comes”
By the time tax season arrives, many contractors are dealing with months of accumulated bookkeeping work.
At that point, bookkeeping becomes a cleanup project instead of an ongoing system for understanding the business.
“Bookkeeping Is Too Expensive”
It makes sense to consider the cost of hiring a bookkeeper. But that cost should also be compared with the time spent doing the bookkeeping yourself and the problems that can come from books that are months behind or inaccurate.
For a contractor, a few hours spent trying to figure out QuickBooks every month are also hours that could have been spent estimating jobs, serving customers or managing the business.
What Contractors Gain From Outsourcing Bookkeeping
When contractors hire a bookkeeper, the benefits often go beyond cleaner books.
They can include:
More time to focus on customers and jobs
Less stress when tax season arrives
Better visibility into profitability
More confidence in the numbers
Consistent monthly financial reports
Less time spent trying to figure out QuickBooks
Good bookkeeping should make the financial side of the business easier to understand, not more complicated.
One Piece of Advice for Every Contractor
If there is one piece of advice I would give every contractor, it is this:
Do not wait until tax season.
The longer bookkeeping is delayed, the harder it becomes to catch up and the less useful the financial information becomes.
Keeping your books current throughout the year gives you a clearer picture of your contracting business and makes tax season much easier when it arrives.
How Clevant Bookkeeping Supports Contractors
At Clevant Bookkeeping, we focus on keeping books accurate, organized and tax-ready throughout the year.
We provide monthly financial reports, prioritize prompt communication and work to make bookkeeping simple and understandable.
We support contractors, handyman businesses, plumbing companies and other home service businesses that would rather spend their time serving customers than managing QuickBooks.
Our goal is to give contractors accurate financial information they can use to make better business decisions while reducing the stress that often comes with bookkeeping and tax season.
When the books are accurate and up to date, you can spend less time worrying about the numbers and more time running your business.
If your bookkeeping is falling behind or you are ready to stop spending your own time managing QuickBooks, learn more about our bookkeeping services for contractors and home service businesses.