Home > Carpet Cleaning, How to, The Executive's Guide to Carpet-Cleaning > You’re Paying More Taxes Than You Need To

You’re Paying More Taxes Than You Need To

The Executive’s Guide to Carpet Cleaning Part I: FINANCES

The Books Part III: Income

(This is Day 3 of a three-day crash course in accounting basics for carpet cleaners. To check out Day 1, click here; to check out Day 2, click here.)

Oh, income. I could go off on a tangent here, talking about how important income is; how you’re not charging enough (seriously, raise your prices by 5 percent tomorrow); and how income is the life blood of your business.

But that’s for a future edition. Today, we need to address how you’re tracking and reporting on your income.

If you’re not separating your personal and business finances, your income is, well, personal income. That’s bad. For one thing, it means that you’re paying more taxes than you need to be.

Don't let this happen to you.

If you track your income, you can generate some real savings for yourself when April 15 rolls around. And the fact is, you can’t escape your tax obligations by not tracking these numbers.

Not only do you put your business and personal finances at risk, you also miss out on some critical reporting. What you track will play into what you get out of it.

Here are a few basics you should know:

Just the facts, ma’am: At the very least, you should be recording cash sales. In addition, if you’re using a credit card merchant, you’ll need to track the payments you receive.

But if you plan on operating your business without any kind of billing, a cash sales record is what you’re looking for.

Think of a cash sale record as a copy of a receipt. You did work, the customer paid you, end of story. Some cleaners itemize what they did, some don’t.

If the services you provide require you to pay sales tax, you may want to itemize your cash sales to reduce tax liability. Check your local tax law for details.

At a bare minimum, you should be tracking each job’s date of service and the amount paid for it.

If you're not careful, your unpaid invoices could really start piling up.

If you need to bill a client, then you have to track invoices. Invoices work much like cash sales. The difference between them has to do with payment timing.

Your Accounts Receivable is the money owed to you from clients that you’ve completed work for, but who haven’t paid you yet. Depending on your accounting method, your business doesn’t realize income from an invoice until the invoice is paid.

If you’re not tracking your invoices, you will have no idea who owes you money. We had a client a few years ago that switched from paper bookkeeping to ServiceMonster. After he entered his recent account history, he realized that he had over $50,000 in unpaid invoices.

His office assistant hadn’t been tracking who owed what. She doesn’t work for him anymore.

Additional Information to Track:

  • Last Service Date: It’s exceedingly important to track the last date of service for all your clients. When you know that date, you can contact them when they are most likely to buy again.
  • Payment Records: By tracking payments, you’ll be able to keep balances and payment histories for your clients. You’ll also be able to distinguish your income from your profit much more easily.
  • Line Item Details: By tracking line item details, you’ll start to learn which of your products and services your clients are actually buying. You’ll also be able to track the success of new products and services when you add them to your business.

Taking it to the next level: How you track this information is just as important as tracking it in the first place. If you can’t easily turn your records into reports, they’re not much good (and it will cost you more come tax season).

Programs like QuickBooks cover the basics like cash sales, invoices, and payments. But QuickBooks falls short when you want to understand your customers. To get a full picture of your business, use ServiceMonster.

ServiceMonster
will help you to manage your finances, convert more leads into sales, and increase the cost-effectiveness of your business.

Want to get control of your money? Try ServiceMonster for free today!

  1. August 29, 2011 at 7:39 pm

    Right on my man!

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