Introduction:
This is Part 4 of our 5-part series on transforming your painting and handyman business into a professional, scalable operation.
Read Part 1: Tools & Equipment
Read Part 2: Legal Structure & Licensing
Read Part 3: Insurance Coverage
You've got the tools, the legal structure, and the insurance protection. Now it's time to master the financial side of your business. This is where many contractors struggle—they stay busy, work hard, but somehow never seem to get ahead financially.
Financial management often distinguishes contractors who build wealth from those who barely survive. Proper accounting gives you visibility into what's really happening in your business, helps you make informed decisions, ensures tax compliance, and ultimately allows you to keep more of what you earn.
In this guide, we'll walk through setting up accounting systems, choosing the right software, tracking true job profitability, managing cash flow, and understanding your tax obligations. This isn't the most exciting part of running a contracting business, but it's absolutely essential for long-term success.
Important Legal Disclaimer
Please Note: The information provided in this guide is for educational and informational purposes only and should not be considered financial, tax, or accounting advice. Jurisdictions and individual circumstances significantly vary in tax laws, accounting requirements, and financial best practices.
Before making any financial or tax decisions based on this information, you should:
Consult a certified public accountant (CPA) or tax professional who understands contractor businesses and your specific situation.
Work with a bookkeeper or accounting professional to set up your systems properly.
Verify all tax obligations with the IRS and your state tax authority.
Stay current on changing tax laws that may affect your business.
This guide helps you understand what systems you need and what questions to ask, but it cannot replace personalized professional advice from qualified financial and tax professionals.
Why Proper Accounting Matters
Before diving into the how-to, let's understand why this step matters:
Know your true profitability—Many contractors think they're making money but don't realize they're actually losing money on certain types of jobs. Proper accounting reveals which services and clients are profitable.
Make informed decisions. Should you hire an employee? Buy that expensive tool? Raise your rates? You can't answer these questions without accurate financial data.
Manage cash flow—Knowing when money is coming in and going out prevents cash crunches that can cripple your business even when you're technically profitable.
Stay tax compliant—proper records ensure you pay the right amount of taxes—not too much, not too little—and have documentation if audited.
Secure financing—banks and lenders require financial statements. Organized books make it possible to get loans or lines of credit when needed.
Build business value—if you ever want to sell your business, buyers need to see clean financial records proving profitability.
Let's build the systems that make all this possible. Implementing effective accounting practices streamlines your operations and positions your business for future growth. By investing in reliable financial systems and tools, you can enhance transparency and make informed decisions that drive success.
 |
| This includes notepad, office supplies, and tools specifically for your accountant. |
Setting Up Your Accounting Foundation
Separate business and personal finances.
This is rule number one, and it's non-negotiable. Open a dedicated business bank account and run all business income and expenses through it. Never mix personal and business transactions.
Why such an arrangement matters:
Simplifies tax preparation (no sorting through personal expenses to find business ones)
Provides legal protection for LLC owners (mixing finances can pierce the corporate veil)
Gives you clear visibility into business performance
Makes audits much easier if they occur
Looks professional when providing bank statements to lenders or landlords
What you need:
Business checking account—for daily operations, bill payments, and deposits
Business savings account—for setting aside tax money and building emergency reserves
Business credit card—Simplifies expense tracking and builds business credit
Choose a bank that offers business checking with reasonable fees, online banking with excellent mobile apps, integration with accounting software, and local branches if you prefer in-person banking. Additionally, consider the bank's customer service reputation, as having reliable support can be crucial when managing your finances. Researching different options can help you find the best fit for your specific business needs.
 |
| Women reviewing options for banking accounts best fits your needs |
Choose Your Accounting Method
You'll use either cash-based or accrual-based accounting.
Cash basis accounting records income when you receive payments and expenses when you pay them. This is simpler and shows your actual cash position. Most small contractors use the cash basis because it's straightforward and provides a clear picture of available cash.
Accrual accounting records income when earned (even if not yet paid) and expenses when incurred (even if not yet paid). This provides a more accurate picture of profitability but is more complex. It's required for some larger businesses and those carrying significant inventory.
For most painting and handyman businesses under $25 million in annual revenue (yes, that's the IRS threshold), cash basis accounting is perfectly acceptable and much simpler. Start there unless your CPA advises otherwise.
Set Up Your Chart of Accounts
Your chart of accounts is the organizational structure for all financial transactions. It categorizes every dollar that comes in or goes out.
Income accounts (what you earn):
Interior painting
Exterior painting
Carpentry/trim work
Drywall repair
Plumbing services
Electrical services
General handyman services
Service calls/consultations
Breaking income into categories helps you identify your most profitable services. This, in turn, enables you to make informed decisions about where to focus your marketing efforts and resources. By regularly reviewing your chart of accounts, you can also spot trends and adjust your services to meet changing customer demands.
Cost of Goods Sold (COGS) (direct costs for completing jobs):
Paint and painting supplies
Lumber and building materials
Plumbing materials
Electrical materials
Hardware and fasteners
Subcontractor payments
Operating expenses (costs to run the business):
Vehicle expenses (fuel, maintenance, repairs)
Vehicle insurance
Tools and equipment
Tool repairs and maintenance
General liability insurance
Workers' compensation insurance
Professional liability insurance
Licenses and permits
Office supplies
Marketing and advertising
Website and software subscriptions
Bank fees and merchant services
Professional fees (accounting, legal)
Continuing education and training
Cell phone
Utilities (if you have a shop/office)
Rent (if applicable)
Owner's salary (if S-corp or corporation)
The more detailed your categories, the better you can track where money goes and identify opportunities to reduce costs. By regularly reviewing these expenses, you can make informed decisions that enhance your business's financial health. Moreover, implementing cost-saving strategies can free up resources for growth and innovation.
Implementing Job Costing
Job costing means tracking all income and expenses for each individual project or customer. Modern accounting software makes this straightforward:
Create a customer or project for each job
Assign all income from that job to the customer/project
Assign all expenses for that job to the customer or project (materials, labour hours, subcontractors, etc.).
Review profitability—software calculates profit/loss per job automatically.
Example: You complete a $3,500 interior painting job. Job costing reveals:
Labour: 32 hours at $50/hour = $1,600.
Paint and materials: $450
Fuel and vehicle costs: $60
Total costs: $2,110
Gross profit: $1,390 (39.7% margin)
Without job costs, you might think you made $3,500. In reality, you made $1,390 before accounting for overhead (insurance, tools, marketing, etc.). Understanding these figures is crucial for making informed decisions about future projects. By accurately tracking costs and profits, you can identify which types of jobs are most profitable and adjust your business strategies accordingly.
 |
| Reviewing your estimate with labour and materials |
In Part 5 of this series—the final installment—we'll cover invoicing and billing best practices, payment processing options, customer relationship management, and strategies for growing your business. We'll tie together everything from Parts 1-4 into an actionable implementation plan that takes your painting and handyman business from where it is now to where you want it to be.
Final Financial Reminder
Tax laws, accounting requirements, and financial best practices vary significantly by jurisdiction and individual circumstances. Before implementing any financial or tax strategies:
Consult a CPA or tax professional who understands contractor businesses.
Work with a bookkeeper to set up systems properly
Verify all tax obligations with federal and state authorities
Stay current on changing tax laws that affect your business.
Series Navigation:
You are currently in Part 4: Accounting, Financial Systems & Tax Planning.
Part 5: Invoicing, Billing, Payments & Growth Strategies (Coming next—the final installment!)
This PDF includes:
The "Separate & Conquer" Rule: A step-by-step guide to separating business and personal finances.
Expense Tracking Cheat Sheet: A list of 15+ tax-deductible items you might be missing (from mileage to home office space).
The Ontario Tax Buffer: A simple formula to calculate how much to set aside for HST and income tax so you’re never caught short.
Monthly Financial Pulse-Check: 5 numbers you should look at every 30 days to ensure your business is actually making a profit.
👉
What accounting challenges have you faced in your contracting business? Share your questions in the comments below!
Regards,
Ready for a Home Makeover?
Stop putting off those repairs! We specialize in expert painting and reliable handyman services right here in the area. From applying a fresh coat of paint to fixing nagging household issues, we handle the hard work so you don't have to.
[Click Here to View Our Full Services List] Get a Free Estimate Today!
About the Author – JFB Handyman
JFB Painting and Handyman Services has been proudly serving homeowners since 2018, providing reliable, detail-focused home maintenance, repairs, and improvement services. With years of hands-on experience solving real foundation, soil, drainage, and structural issues, JFB Handyman brings practical knowledge to every project and every article.
From small fixes to complex home challenges, the goal has always been the same: deliver honest workmanship, protect your investment, and help homeowners understand how to keep their property in top condition. This commitment to quality, transparency, and long-term solutions has made JFB Handyman a trusted name in local home repair.
No comments:
Post a Comment