As a plumbing business owner, it's important to understand the accounting requirements that apply to your business. Proper construction accounting is essential for the success and growth of your business, and it starts with designing you accounts to suite your business.
Reduce your tax by maximising your plumbing expenses
Improve your financials by designing your accounts to suite plumbing operations
Professionalise your business by introducing financial standards and expectations
Construction Accounting will ensure that the accounting requirements for your plumbing business, including your chart of accounts, tax obligations, and financial reporting. Are specifically laid out to suite your business and designed to give you the best financial understanding or your company.
Your chart of accounts helps you categories all financial transactions for your business. This includes sales, expenses, receipts, and payments. It's important to keep accurate and up-to-date records of your financial transactions, as this information will be used to prepare financial statements, tax returns, and other reports. You can use accounting software to simplify your reconciling process and ensure that your records are accurate. Typically, Xero and MYOB are the go to for trade businesses.
As a plumbing business owner, you have several tax obligations that you need to fulfil. These include:
You are required to pay income tax on the profits of your business. This tax is based on the net income of your business, which is calculated by subtracting your business expenses from your business income.
If you sell over $60k of taxable goods or services, you will be required to collect and file gst returns.
If you have employees, you are required to withhold and remit PAYE on their behalf. Most likely you will use a software to help calculate, record and file your PAYE obligations.
In addition to accounting and tax obligations, you may also be required to prepare financial reports for your business. These reports provide valuable insights into the financial health of your business and help you make informed decisions about its future. Some of the common financial reports that plumbing businesses prepare include:
This report summarises your revenue and expenses for a specific period of time, such as a month or a year.
This report provides a snapshot of your business's assets, liabilities, and equity at a specific point in time.
This report shows the flow of cash in and out of your business over a specific period of time.
In conclusion, as a plumbing business owner, you have several accounting requirements that you need to fulfil. These include your day to day accounting functions, tax obligations, and financial reporting. By keeping accurate records and working with an experienced construction accountant, you can ensure that your business remains financially healthy and compliant with all relevant accounting regulations.
A plumbers set of accounts must represent the companies activities and the size of the business.
As with all construction accounting, when designing a set of accounts for a plumbing company we need to identify the revenue streams that have direct costs associated to them. We can get this information from your quotes and past jobs. We also need to identify any other major revenue streams that we would like to identify separately.
Once we have set up your income accounts we then create the accounts for the direct costs associated with deriving revenue. This is a great way to ensures all of your business operations are individually profitable. For example, you may be adding a margin to materials, having the income and costs identifiable will allow you to check at the end of the month whether or not these margins are actually being recognised as your business goes about it's operations.
Lastly we want to ensure that no other variable costs are sitting in our overheads section and vice versa. Commonly we find that management salaries have not been pulled apart from the operating wages. This must be done to ensure a correct reading of the accounts. Having your management costs separated is key when exploring or forecasting growth and the growing of your plumbing companies management.
This completes the top half of the income statement and the gross profit, this will give you some good insights into the company.
A key metric for plumbers and any other business that operates fairly often with an hourly rate id billable hours vs total hours. This should be tracked outside of your accounting system, through your payroll and job management software.
Different forms of profit, tracking categories, and timing are discussed below.
We like to show different levels of profit, typically most statements might have net profit and profit after tax. However another good figure is you operating profit or EBITDA. This shows the plumbing companies performance before the current ownership structures costs, this can have better comparability over time as the companies capital structure changes.
Timing is the last key issue for plumbers, we must do our best, sometimes creatively, to align the revenue streams with the costs otherwise we risk throwing out our gross profit. Typically what happens is a plumber would receive an invoice from their supplier but not be at a stage to invoice their client. In most cases we can get around this even if you have to create a separate expense account for these situations.
Further breakdown of the income statement can also be achieved through tracking categories, most accounting systems have this extended feature. This is not represented in the above example as it is even more company specific. We do however believe that most construction companies should be utilising this feature.