MACH Accounting

𝟕 𝐁𝐨𝐨𝐤𝐤𝐞𝐞𝐩𝐢𝐧𝐠 𝐌𝐢𝐬𝐭𝐚𝐤𝐞𝐬 𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭𝐨𝐫𝐬 𝐌𝐚𝐤𝐞. 𝐀𝐧𝐝 𝐇𝐨𝐰 𝐭𝐨 𝐀𝐯𝐨𝐢𝐝 𝐓𝐡𝐞𝐦.

Contractors often juggle multiple jobs and suppliers, making bookkeeping a challenge. A little discipline can prevent costly errors. Here are seven common mistakes (from our in‑house resource) and how to fix them:

1. Mixing personal and business finances – Using the same bank account or credit card for personal and business transactions makes it impossible to track expenses accurately. Open a separate business account and card; pay yourself a salary or draw rather than using business funds for personal purchases.

2. Not tracking job costs – Without project‑level costing, it’s hard to know which jobs are profitable. Set up cost codes for labour, materials, subcontractors and overhead; use time‑tracking apps and allocate supplier invoices to the correct jobs.

3. Waiting until tax season to do the books – Playing catch‑up at tax time leads to missed deductions and errors. Schedule regular bookkeeping sessions (weekly or monthly), and consider cloud‑based software that syncs transactions automatically.

4. Not reconciling accounts monthly – Bank and credit‑card reconciliations catch missing entries and bank errors early. Reconcile every account monthly and investigate discrepancies immediately.

5. Poor invoice tracking – Late invoices and unpaid receivables hurt cash flow. Implement a clear invoicing process: issue invoices promptly, set payment terms, follow up on overdue accounts, and consider progress invoicing on long projects.

6. Incorrect expense categorization – Miscoding expenses (e.g., classifying subcontractor payments as supplies) distorts your financial statements. Develop a consistent chart of accounts tailored to contracting work and educate anyone entering transactions on where to code expenses.

7. Not reviewing financial reports – Your income statement, balance sheet and cash‑flow statement are more than year‑end necessities. Review them monthly to spot cost overruns, under‑billing and profitability trends. Use the insights to adjust pricing, scheduling and purchasing decisions.

𝐀𝐜𝐭𝐢𝐨𝐧: Implementing proper systems now will save hours of work later and provide a clearer picture of profitability. Our team offers bookkeeping support tailored to contractors, from setting up cloud software to providing monthly review meetings.

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Disclaimer:
This post is general information only and not tax advice. Feel free to save or share this, and contact us if you need assistance getting organized.