Plumbers offer a valuable service that impacts the health and hygiene of the community. Likely, the lifeblood of your plumbing company is the revenue you receive from customers. It is vital that you manage the accounting side of your plumbing business efficiently to ensure constant cash flow. Plumbing company bookkeeping makes it possible for you to keep accurate records and follow up with customers who are not paying for the services rendered.
How Accounting for Plumbing Companies Help Monitor Expenses
As a plumbing company owner, there are two primary expenses your business incurs. These are labor and parts. When you purchase parts to do repairs on your customer’s homes or businesses, you need to accurately record the prices paid for the parts and where the parts were purchased. This will allow you to keep an accurate record for tax filing.
If you work on your own, it’s relatively easy to keep track of labor expenses. However, if you have additional plumbers employed, it may be worth consulting a CPA familiar with accounting for plumbers, to set up appropriate software to monitor and manage the billed hours of all plumbers working for your company, working using time cards. They will link the work done by a particular plumber to the cost of a job. This information could allow you, as a business owner or business manager to keep an accurate record of tax-related expenses and help you identify the employees who are the most productive. It allows you to show proof of business expenses when the time comes to do your business taxes or payroll.
What to Consider When Tax Planning Strategy for Plumbing Company
It can be beneficial to do your tax planning year-round. The more aware you are of taxes throughout the year, the easier things could go when it is time to file your taxes.
1. Pay Tax Payments in Installments
Paying your taxes in installments is an intricate part of successful plumbing company accounting. As a small to medium-sized business, you may get hit with a larger-than-expected tax burden. This could threaten to close your business as it drains you of cash flow. Paying your taxes in installments may also help you keep more cash in your hands, especially if your small business already has narrow margins or restrictive cash flow.
2. Keep Track of Business Deductions
For your plumbing business to take full advantage of tax deductions, your CPA should be diligent in keeping records and recording all reasonable and necessary business expenses. This can be done yourself if you have the proper accounting software. Some of these expenses are obvious, such as salaries, rent, and the purchase of certain tools. Business travel expenses, advertising, and in some instances, food – may also be eligible for deduction when filing your tax return.
3. Classify Your Business Appropriately
Talk to your plumbing company financial adviser about the best entity structure classification for your business. If you have not classified your company properly, you might pay unnecessarily high taxes. Is your business a sole proprietorship, an LLC, or a partnership? Your plumbing company accountant can help you find the right classification for your situation, which might help you save on tax liability.
4. Consider Professional Tax Planning
There are many parts of your business accounting that you can do yourself as a small plumbing business. This will require the correct software setup and diligent accounting efforts from the business owner. The problem however with managing the accounting side of your business yourself is that it may take you away from the key operations within your business, that are central to making your money. It may also create a mess in your bookkeeping if not handled correctly, which could have devastating effects on your tax filing process.
At Fusion, our CPAs offer assistance to plumbing companies – large and small. We have years of experience in managing the books of plumbers and filing their taxes, but we can also set up accounting software to help you do so yourself if you have the time capacity to do so. Learn more about our services by scheduling a complimentary discovery call today!
This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.