As a pest management company leader, you must juggle operations, management and marketing — as well as customer service and several other functions. Unless you have someone on staff who has all the skills needed to manage accounting duties, this can be a huge source of frustration. The key is to stay organized. Here are five steps you can take to get organized and bring your finances under control.
Talk to a Certified Public Accountant (CPA). When most people think of a CPA, they think of taxes. However, there is a lot more to the accounting function than taxes. A competent CPA should be able to file your taxes and prepare financial statements for banks, creditors and other stakeholders in your business. Your CPA’s overall goal should be to help you accumulate and preserve wealth. Saving you money at tax time is just a small part of the job. Your accountant should be a valued member of your management team.
- Look at your business entity structure. Generally speaking, there are three common business organizational structures: sole proprietorship, partnership and corporation. A fourth option, which is an excellent fit as to the way we carry on business, is a limited liability company (LLC). For accounting purposes, LLCs can be set up like either of the first three and taxed accordingly. Under current law, an S corporation (S-Corp.) in most cases will minimize federal taxes. Consult your accountant or lawyer, as he or she is in the best position to assess your federal tax consequences — as well as consider your state tax laws and how they fit into your overall financial picture.
- Separate your personal and business finances. For legal purposes and to keep tax records straight, make sure both are separate. This starts with tracking your business expenditures accurately, without commingling your personal and business expenses. The easiest way to do this is to maintain separate bank accounts. Make sure you conduct business expense and revenue transactions from your business account. Handle personal items like home mortgage and other household cost transactions using your personal account. Another easy way to keep your finances straight is to use a business credit card, not your personal credit card, for all business purchases.
- Use accounting software to get organized. Most of these programs can manage revenues, expenses, payroll, cash flow and budgeting. Having accurate and timely information is paramount to success in the pest business, and a software program simplifies this process.
- Set up a budget. Budgeting is nothing more than formulating a coherent financial plan for some period in the future, usually one to two years. Budgeting allows us to predict the number of technicians, vehicles, equipment, etc., needed in the future based on revenue projections. During the budgeting process, we determine the areas of spending that can be reduced, and which lines of business are most profitable. Budgeting should be done annually, and actual results should be compared to budgets monthly.
Understanding your finances is a key success factor in operating your business. The more you know, the more effective you will be at operating a profitable company. Financial visibility helps you through seasonality, growth and times of difficult cash flow. Staying organized is key to this clear visibility, and working on the five steps discussed here will help you maintain this financial visibility.
Contributor Dan Gordon is a CPA in New Jersey, and owns PCO Bookkeepers, an accounting and consulting firm that caters to pest management professionals throughout the United States. He also runs several peer groups that meet semi-annually. He may be reached at firstname.lastname@example.org.
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