The Bookkeeping Tips for Tradies

Written by

Greg Bramich

FCPA, Director & Co-Founder

Resident snack monster. Ultimate Lebron fan boy.

Hey there, tradie mates! If you’re like most tradies and would rather be on the tools than stuck behind the desk, this is something for you. The fact is, effective bookkeeping is as important for your business as a well-stocked toolbox. So, make yourself a cuppa and let’s have a conversation about how to manage your accounting books effectively without going insane.

Why is Bookkeeping Crucial for Tradies?

Ever felt like you’re juggling chainsaws while trying to balance your books? You’re not alone. But here’s why it’s worth getting a handle on:

1. Keep your business finances organised: No more scratching your head wondering where that invoice went.
2. Make sure nothing falls through the cracks: Because every dollar counts, right?
3. Meet tax obligations and avoid penalties: The ATO isn’t known for its sense of humour when it comes to late lodgements.

Common Bookkeeping Challenges for Tradies
Let’s face it, we’ve all been there:

• Drowning in a sea of receipts
• Forgetting to invoice that one job
• Trying to decipher your own handwriting on a quote from three months ago

Sound familiar? Don’t worry, we’ve got your back.

Organising Your Financial Documents Efficiently

What Types of Documents Should You Keep?

First things first, what must you actually keep? Here’s a quick rundown:

• Invoices (both the ones you send and receive)
• Receipts for business expenses
• Bank statements
• Tax returns and supporting documents
• Employee records (if you have any)
• Vehicle log books

Tips to Organise Your Paperwork

1. Go digital: Snap photos of receipts with your phone. There are plenty of apps out there that can help you keep track (we like Hubdoc that comes with most Xero subscriptions).
2. Set up a filing system: Whether it’s physical folders or digital ones, keep everything sorted by month and year.
3. Regular check-ins: Set aside time each week to update your records. Trust us, future you will thank present you.

Tracking Income and Expenses Accurately

Choose The Right Bookkeeping Method

Alright, let’s break down your options:

Categorise Income and Expenses

Creating categories that fit your business is like organising your toolbox – everything has its place. A well-structured system will help you track your financial performance and make informed decisions.

Here are some common categories for tradies to consider:
Income:
– Labour
– Materials
– Callout fees

Expenses:
– Tools and equipment
– Vehicle expenses
– Insurance
– Subcontractor payments

Keep Detailed Receipts

Trying to claim a business expense without a receipt can be as frustrating as using the wrong tool for the job. Remember, keeping detailed records of your expenses is essential for accurate financial reporting and tax compliance. Keep those receipts, mates!

Managing Taxes Throughout the Year

What Tax Obligations Do Tradies Have?

Taxes. The word that strikes fear into the hearts of tradies everywhere. Here’s what you need to know:

1. Goods and Services Tax (GST): If your annual turnover is $75,000 or more, you need to register for and collect GST.
2. Pay As You Go Withholding (PAYG-W): If you have employees, you need to withhold tax from their wages and report it to the ATO.
3. Business Activity Statements (BAS): These need to be lodged either monthly or quarterly, depending on your business size.
4. Income Tax: You’ll need to lodge an annual income tax return for your business.
5. Superannuation: If you have employees, you need to pay super contributions for them.

According to the Australian Taxation Office, about 45% of small businesses in the construction industry fail to meet their tax obligations on time. Don’t be part of that statistic!

Planning for Next Year’s Taxes

Here’s a pro tip: start thinking about next year’s taxes. By setting aside a portion of your income throughout the year, you’ll avoid the stress and financial burden of a large tax bill come tax season.

A general guideline is to allocate 30-35% of your profit in taxes. However, this can vary depending on your specific circumstances. It’s highly recommended to consult with a tax professional to determine what works best for your business.

Keeping an Eye on Cash Flow

Reconciling Bank Statements

Ever felt like a detective where your bank account is concerned? Well, regular reconciling of your bank statement may just make sure that any differences are detected well before they become big problems.

Managing Accounts Payable and Receivable

Not getting paid on time can be a tradie’s worst nightmare. Stay on top of who owes you what, and who you owe. There’s nothing wrong with chasing up overdue payments – you’ve completed the work, you deserve to get paid!

Understand Payroll Obligations

As an employer who has employees, you have specific payroll obligations that must be met. This includes:

• Paying wages on time: This ensures employee satisfaction and helps maintain a positive work environment.
• Withholding the right amount of tax: This means that income tax, Medicare levy, and other taxes are withheld accordingly.
• Paying superannuation: This is a compulsory part of your employees’ remuneration.
• Keeping accurate records: Providing your employees with regular payslips that detail their earnings, deductions, and net pay.

According to a report by the Australian Payroll Association, 85% of businesses experience payroll errors. Don’t let that be you!

Options for Bookkeeping in Australia

Do It Yourself Bookkeeping

So are you interested in giving it a try? More power to you! Just make sure you’re aware of all the obligations and have a system that works for you. There are plenty of online resources and training available if you want to upskill.

Hiring a Professional?

Sometimes, calling in the experts is the smartest move you can make on that particular case. It’s like hiring a sparky for electrical work – sure, you could try it yourself, but is it really worth the risk?

That’s where Future Advisory comes in. We’re not just bean counters – we’re your partners in business success. Our team understands the unique challenges faced by tradies, and we’re here to help you navigate the financial side of your business so you can focus on what you do best.

With Future Advisory, you’ll get:

• Tailored bookkeeping solutions for your trade business
• Expert advice on tax planning and compliance
• Regular financial health checks to keep your business on track
• Peace of mind knowing your finances are in expert hands

In Conclusion

Bookkeeping might not be the most exciting part of running your tradie business, but by staying on top of your finances, you’re setting yourself up for long-term success.

Remember, good bookkeeping is like preventative maintenance for your business. A little effort now can save you a lot of headaches down the track. And if it all feels a bit overwhelming, don’t be afraid to call in the experts. 

So, what’s your next move? Will you be implementing some of these tips, or are you ready to hand over the reins to a professional? We’re just a call away if you need a hand.