Understanding Bookkeeping for Landscaping Business

Landscaping is a unique industry in the U.S. in that it has a high market capitalization while also being extremely diversified. It's estimated that 70% of the nearly 600,000 landscaping businesses in the country are operated by small business owners-all of whom are vying for part of the $105 billion annual market. Landscaping has a comparatively low barrier to entry, consistent demand, and little liability, meaning that savvy business owners can turn good profits.

However, landscaping is also a physically demanding job requiring a considerable knowledge base, meaning that running a successful business requires owners to wear many hats. And while a good landscaper needs to know their tools, clients, and capabilities, running a profitable business requires detailed bookkeeping-a role that not every business owner might feel comfortable stepping into. Let's take a look at why bookkeeping for landscape business is so important and what owners can do to keep the books balanced.

Why Is Bookkeeping for Landscaping Business Important?

Bookkeeping for construction companies, landscaping services, or other skill-oriented businesses suffer from the same basic problem: companies who are good at building or maintaining property usually need to focus on the realities of the construction process and physical labor involved, meaning that detailed financial records sometimes have to take a backseat. This isn't because these businesses don't understand how important bookkeeping is, but proper record keeping for budgeting, job costing, and tax filing takes time that a busy owner simply might not have.

Bookkeeping's greatest attribute for running a landscaping business comes down to proper budgeting. Simply put, without the kind of detailed financial information that comes from dedicated bookkeeping, it's difficult to understand your profitability in ways that allow you to make effective changes. You might know how much money your business made that year, but without a bookkeeping service, you might not know if your materials cost has gone up, for example, or if your employment structure is costing more on year-end taxes. Good bookkeeping allows you to make an effective landscaping business plan that ensures your getting the best return on your skills, labor, and materials.

Tips on Successful Bookkeeping for a Landscape Business

Successful landscaping bookkeeping is possible for any business owner, but it's dependent on the amount of time you spend on record keeping in between jobs. Many business owners make the mistake of considering bookkeeping only when taxes are due, but saving all of your important financial work for a single time during the year can lead to costly mistakes, incorrect tax returns and refunds, and missed opportunities for savings and effective budgeting throughout the year. Following some of these tips can help:

1. Create and Stick to a Detailed Landscaping Business Plan

The most important numbers for your business, and ones you should be intimately familiar with, are your profit and loss statements. Either yearly or quarterly, you should create a forecast and budget for your operations based on how much you spent and earned during the previous business period.

Consider all the costs your landscaping business needs to operate: labor, equipment, repair fees, transportation costs, utilities, insurance, etc. Compare this cost to what you earned in the time frame you are referencing, and consider whether you expect your income to grow, shrink, or stay the same over the period you are planning for. While the budget you come up with may not be perfect, sticking to it will help you learn cost discipline and better prepare you for unexpected costs you might not have planned for.

2. Decide Which Accounting Method Is Right for You

When you submit your tax returns, you'll have to choose between an accrual basis and a cash basis. The easiest of the two is the cash basis method, which tracks expenses that are paid out and when your income is received.

Accrual basis accounts for money and expenses when they are earned. This method requires a more active approach on your end, but it will give you a clearer picture of your business's cash flow. However, before you decide on which method is best for you, it's best to speak with a CPA to learn more about the requirements and tax liability of each.

3. Track everything

This one sounds obvious, but it's crucial that every expense made on behalf of your company is accounted for in order to give the full picture of your cash flow. One way to make sure that nothing falls through the cracks is to use break up the work into weekly and monthly accounting tasks.

Choose a day of the week to go through all of your purchases and organize them into distinct categories, along with digitized receipts or any other documentation that might exist for the transaction. Doing this weekly will ensure that even small purchases don't add up to unexpected totals, which can be a problem in bookkeeping for small construction companies or landscaping firms when a new bag of fertilizer or extra concrete is needed in the middle of a job.

When it comes to monthly tasks, you should double-check your expense record in a process called reconciliation to ensure nothing was missed. It's also important to send invoices at the end of every month to ensure timely payment and make sure that all of your bills are paid in full at the same time every month.

You can use a spreadsheet to manually enter this information in ways you can keep track of it, but you may also want to consider using online bookkeeping for landscaping businesses, which may offer automated features to take some of the work off your hands.

DIY Versus Hiring a Professional

Business owners should understand their cash flow and feel confident when it comes to looking at the numbers that determine profitability. That said, not every business owner needs to be an accounting genius to run their company effectively. Hiring an accounting firm to handle the day-to-day can come with multiple benefits that balance or even outweigh the initial cost. If you lack the time or resources to handle your own accounting, worry about the potential for audits or the accuracy of your tax refund, or simply need a second opinion on lost productivity, you may benefit from employing an accounting firm with experience in landscaping bookkeeping. Small business accounting services allow landscapers and construction workers to spend more time focusing on getting the job done instead of the intricate financial details.

If you're considering bookkeeping for a landscaping business, Appletree has years of experience in bookkeeping for construction in New Hampshire and the rest of the country and is well-equipped to help you boost organization and productivity. Our Team of accountants, CPAs, and other business professionals can help with bookkeeping, payroll, taxes, and general business consulting so you can focus on what you do best. Contact Appletree Business Services today for an initial consultation, and let us help your landscaping business thrive.