You have spent the last 3-4 years completing your trade apprenticeship and gaining valuable on the job experience. You are verging on calling yourself an expert! You are ready or have already made the leap to go out on your own. You have the tools, the ute and the contacts. Or maybe you have worked hard to build your business already, grown your client base, and spent a considerable amount of time traveling to different job sites to provide a service that only a select few can.
So it makes sense that you look to hire a bookkeeper who has done the same! After all, they are going to take care of your day-to-day finances, update and maintain your financials/ books and ensure you stay compliant with government bodies. You’d want them to be an expert also? We know that bookkeeping for trades businesses can be time-consuming and it’s not something you want to be doing at the end of a busy day. DIY bookkeeping is like DIY building or plumbing….a ‘cheap fix’ but more often than not costly in the long run!
When looking to hire a bookkeeper for your trades business, consider these top 5 tips:
1. Industry knowledge & Expertise
Bookkeeping services will ensure your books are balanced and updated each month. Almost all bookkeeping engagements have the same tasks in common, reconcile the bank and credit card, code transactions for GST, entry of supplier invoices for payment, preparation of BAS returns and preparing basic financial reports. But, you know that the plumbing industry has some unique needs!
The best approach is to look for a bookkeeper that has worked with trades businesses before, ideally a bookkeeper for plumbers; but at the least understands an SME trade based business. You want to be sure that the bookkeeper you choose has experience working with other plumbing or trades-based companies and has knowledge of your industry’s specific accounting needs.
If you are just starting out, then your bookkeeper should help you set up your accounting system (we recommend Xero). From selecting an accounting system to setting up a chart of accounts and importing suppliers and customers, having the right knowledge lets you organize your finances in a meaningful manner for you and your business. This will likely be different if you are a builder, plumber or hairdresser!
The error we see most often is not creating a ‘Direct Costs’ section and reporting accurately at Gross Profit. Those materials and wages paid to your own tradesman, and likely yourself, should be a direct cost of goods sold, whereas your admin staff’s payroll should be listed under your overhead costs – the cost of running the business as opposed to delivering the work).
Your local bookkeeper needs to understand your trades business to allocate your costs appropriately to the correct section to ensure good visibility on your Gross Profit/Margin.
2. Job Costing
Job costing is not a ‘must have’ when you first start out your plumbing business. But instilling the disciplines required to establish and maintain a job costing system into the future is much easier done at the front end of your business journey.
As you need to invoice each and every job you do, you need a mechanism to track the material costs and labour (qty and cost) that have been used to undertake each specific job.
A Job system will help you to track these costs as well as each job’s status, those that need to be completed, those that need to be invoiced etc and allow you to track the profit your business made on each job. This becomes more relevant and important as your business grows and you want to track the efficiency of other tradies you employ or to track the profitability of new types of work i.e. residential V Commercial.
When considering your bookkeeper, as noted in Tip #1, make sure they have experience understanding job costing and trades businesses such as plumbing. Businesses rely on job costing to understand their profitability on each job clearly. Therefore, you need to have bookkeeping services that provide staff who understand how to implement, interpret and maintain such a system.
3. Payroll expertise
Payroll legislation in Australia is a complex beast and ever changing, so you need to be sure to hire a bookkeeper who not only understands payroll systems from a tax or ATO perspective; but who can also help with the interpretation of current legislation and changes to Modern Awards.
We have seen the introduction of increased reporting requirements around STP and now STP 2, along with Superannuation and PAYG. But it doesn’t end there, you need to track and manage annual leave, sick leave and in some cases long service leave. Your bookkeeper should be fully qualified and hold at a minimum a Cert IV in Accounting & Bookkeeping, when it comes to payroll compliance, you ideally want them to also be a Registered BAS Agent.
Most modern accounting systems have robust and feature payroll modules, such as Xero and QBO; if set up correctly these systems will do all the heavy lifting and track and reports all requirements to the employee and the Tax Office!
4. Familiarity with accounting technology
As a trades business, you have staff in the field most days, so your bookkeeping processes need to be mobile, reliable and allow you to be as efficient as possible. Fortunately, many modern cloud-based accounting technologies on the market tick this box.
However, the accounting system, whilst important, will not meet all of your bookkeeping needs. You need a bookkeeper who understands technology and software add ons. Gone of the days of the big clunky see all-do all ERP systems. Small business needs to be agile and build its own tech stack to ensure it can compete.
Using modern technology and API integration will allow you to save a significant amount of time on manual data entry and will also reduce your bookkeeping costs. Plus, you eliminate the need for physical document storage when you take advantage of cloud-based technology.
Your bookkeeper should know how to use and implement different accounting apps and tools to make your processes are more efficient. Programs such as ServceM8, Simpro when joined with Xero or QBO will give you leading edge field technology, data and cost capture and access to on-the-go features such as mobile invoicing and payments via payment gateways like Stripe.
5. Ability to grow with your business
When we first start out in business, we often don’t consider what we might be building. We match requirements NOW to solutions NOW. When you are considering engaging with a bookkeeper, it is crucial that you find someone that can scale alongside your business. Solo operators will nearly always suffer from an under-capacity issue and leave gaps if they are sick or on holiday. If you hire an in-house bookkeeper or a part-time bookkeeping contractor, their exposure to other businesses and other clients specific to your might limit their will and/or skill to grow alongside your business.
Outsourcing your bookkeeping to a specialized bookkeeping firm means that you have access to a team of bookkeepers that can take on the extra work required as your business expands. They can also provide you with other accounting services such as payroll, accounts payable management, accounts receivable management, management accounting & reporting as well as CFO Advisory such as cashflow management all of which will come in handy as your business grows.
Hiring a bookkeeper to take over the tedious task of managing your books is an excellent idea. It will free up your time and allow you to commit more of your resources to expand your business and make critical financial decisions.
Your Finance Department and our team of trained professionals can provide your plumbing business or any trades business with the assistance and clarity you need to leverage your skills out of bookkeeping and back into your profession!
