Chances are that if you’re an HVAC contractor, bookkeeping may not be your passion, but as a business owner, you need a squeaky-clean set of books to keep your company profitable. Learn the best practices and tools for streamlining HVAC bookkeeping and watch your business soar!
The best HVAC bookkeeping practices include updating the books regularly, checking your financial statements, monitoring cash flow, tracking assets, using HVAC bookkeeping software, and more. Tools like Quickbooks, Service Titan, and Freshbooks can help you manage the books.
An organized set of books will help you stay compliant and run a tighter ship. If you plan to sell your business, buyers will hinge their decisions on the state of the finances. Well-maintained books with accurate reporting appeal to buyers and could swing the sale in your favor.
The Best Practices for Streamlining HVAC Bookkeeping
A streamlined HVAC bookkeeping system will save you many headaches and plenty of money in unnecessary spending, non-compliance, and a host of other messy financial mistakes.
Bookkeeping for HVAC companies is a different beast because there are more variables that can affect the cash flow. HVAC jobs can be seasonal, unforeseen circumstances might derail completion deadlines, and increased labor and material prices can eat into your profits.
Update Your Books Regularly
As a business owner, you might be pushed for time with all the daily service tasks that demand your attention. Still, the discipline of updating your books regularly will be rewarding when tax season comes around because you won’t have a backlog of accounting tasks to check off your list.
Keeping track of your expenses and profits also paints a clear picture of your company’s financial situation and helps you make wiser business decisions. If you are the Jack of All Trades in your business, including the bookkeeper, set aside a specific day every week to capture expenses, job costs, and income.
Check Your Financial Statements Often
Managing your company’s finances can be challenging without some basic accounting knowledge. Educate yourself on reading and interpreting financial statements, which provide an up-to-date snapshot of the company’s financial position. Checking these reports regularly allows you to identify issues and trends when comparing them to previous versions.
Monitor Your Cash Flow
As an HVAC business owner, it’s good practice to make sure your business has enough cash on hand. The best way to achieve this is by creating a cash flow projection or forecast. A cash flow projection considers the expected income and expenses to calculate the cash balance after those transactions occur.
Regularly updating and comparing these projections with actual figures will help you plan wisely and prevent unnecessary cash flow disasters.
First-Class Invoicing Protocols
Many businesses have cash flow problems due to poor invoicing systems, so it’s wise to establish strict protocols for this process. You will need an accurate system that generates bills quickly and shows the breakdown of all costs, such as labor, service description, and parts used.
Sending your invoice to the client soon after the service delivery will help speed up the payment process. If you have invoicing software, use it to send automated reminders of payment dates.
Repeat business comes from direct interaction with your customers. Building relationships with your clients is one of the best practices that goes hand in hand with making sure payment comes in. Even polite thank-you notes go a long way in ensuring your clients pay promptly.
Tracking Assets and Managing Inventory
HVAC companies usually need large vehicles and expensive equipment for their services. When you purchase expensive assets and equipment, it’s vital that you track these expenses and depreciation for tax liability purposes and possible audits. You should also keep inventory records of all supplies and parts to avoid shortages and unnecessary purchases.
Hire a Professional
An anonymous accountant once said: “An accountant is someone who solves a problem you didn’t know you had in a way you don’t understand.” Every business needs a person like this in its corner! Partnering with a professional who can provide excellent financial advice and solve complex challenges is a wise move if you want to keep your business profitable and compliant.
Keep Your Business and Personal Finances Separate
For a streamlined HVAC bookkeeping process, you should always separate your personal finances from your company funds. Open a separate bank account for the business and keep each one’s credit cards for their own purposes.
By separating the two, you protect your hard-earned assets in the event of any business disasters that could end in legal action.
Digitize Your HVAC Bookkeeping System
We’re well into the twenty-first century now, so manual bookkeeping should be a thing of the past. Using accounting software saves loads of time and the tedium of repeatedly entering the same customer details, invoices, timesheets, and product data. This leaves less room for human error, which could save your bacon in tax season.
The Best Tools for Streamlined HVAC Bookkeeping
You will seldom see an accountant without a library of Excel spreadsheets. However, these should be helpful sources rather than your company’s bookkeeping system. The right tools can make all the difference to your bookkeeping processes.
QuickBooks for HVAC Contractors
QuickBooks is a favorite choice for HVAC businesses because it offers a range of features that help streamline bookkeeping operations. It allows for job costing, income and expense tracking, invoicing, reporting, tax preparation, budgeting, and forecasting. QuickBooks is user-friendly and also integrates well with other HVAC-specific tools.
Service Titan
Service Titan is a powerful package designed for field service industries like HVAC. It offers invoicing, customer management, and job costing tools, among others, and integrates well with QuickBooks and QuickBooks Online.
FreshBooks HVAC Software
For smaller HVAC businesses or those just starting out, FreshBooks also offers a host of features suitable for streamlining bookkeeping processes. It generates profit and loss reports, assists with tax preparation, tracks payments, gives payment status updates, has a time-tracker, produces expense reports, and allows you to check the invoice details of every customer.
Cloud-Based Accounting Software
Instead of installing and accessing your bookkeeping package on your computer’s hard drive, cloud-based accounting software allows you to do so online. This type of software is ideal for HVAC businesses because contractors can access real-time data from wherever they are.
Cloud-based packages allow you to share access with your accountant, making tax preparation and financial reviews a breeze. This type of software offers a string of bookkeeping features, such as billing, invoicing, managing income and expenses, and generating financial reports. These packages can also automate certain functions, like payment reminders.
QuickBooks Online, Xero, and Zoho Books are some of the best cloud-based bookkeeping tools for HVAC businesses.
Expense Management Software and Apps
These days, businesses hardly need office space because so much can be done on the go. Instead of entering invoices and receipts manually, expense management software allows you to capture them via your devices.
Contractors can use their smartphones to snap a picture of a document, and the software automatically captures the relevant data and stores it in the cloud. Some of the recommended expense management tools include Dext Prepare and Expensify.
Final Thoughts
As a busy contractor and business owner, your focus is probably on growing your company and making money. To stay profitable, you need to keep your financial ducks in a row, something you can best do by streamlining your HVAC bookkeeping with our best practices and tools.