Accurate records help you fulfill reporting obligations to the IRS and ensure you don’t pay more tax than necessary
Key Takeaways
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Set up a separate business account
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Understand business deductions
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Track expenses diligently
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Use financial reports to improve decision-making
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Hire accounting professionals as business starts to grow
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Get more info on accounting tips for landscapers from Franco Blueprint
Landscapers know the ins and outs of building and maintaining gardens. You can take a client’s empty yard and turn it into a lush paradise. You know how to attract new clients and keep your existing clients happy. Those elements are critical to a successful landscaping business, but at the same time, you also need to keep on top of the numbers.
Bookkeeping and accounting help you track the success of your business, and it also saves you time during tax season. To learn how to get started and understand if you’re tracking the numbers correctly, simply keep reading. This post is full of helpful accounting tips for landscapers. It shows you where to start and helps you understand when to bring in the pros.
1. Separate business and personal expenses
Make sure you have an account that is exclusively for your landscaping business. Only deposit income from the landscaping company into this account and make sure that it covers all the landscaping expenses. You can also have a credit card earmarked for business expenses.
This approach allows you to see what you have spent on your landscaping business. It also helps ensure that you don’t accidentally mix up your landscaping and personal expenses.
2. Track all revenue and expenses carefully
Business owners need to report all the income they earn to the Internal Revenue Service (IRS), and failure to do so may result in the IRS auditing your return and reassessing your tax liability based on your unreported income.
However, you can subtract business expenses from your income. If you don’t track all your expenses, you will face a higher tax liability than you should. You can use your bank account statements to track your expenses. However, using bookkeeping software is a better alternative to help keeps things separate and organized.
3. Understand tax deductions for landscaping businesses
What are the tax deductions for a landscaping business? This is one of the most important questions you can ask when you’re handling accounting for landscapers. The IRS says that businesses can claim all ordinary and necessary expenses that they incur for their business.
What does this mean for landscapers? Well, expenses vary from business to business, but some of the most common landscaper expenses include the following:
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Vehicle expenses — You can either claim a deduction based on your mileage or a portion of your total vehicle expenses (insurance, repairs, registration) based on how much you use the vehicle for work and personal use.
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Labor — You can deduct all payments you make to employees or freelance laborers, including your children who work for your landscaping business.
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Depreciation expenses — Big expenses such as buying trucks, mowers, blowers, or trimmers can be depreciated slowly over time, but a lot of equipment qualifies for the Section 179v deduction, which allows you to deduct the entire cost in the year of purchase.
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Advertising — Anything you spend to advertise your services, from printing flyers to putting ads in the newspaper and hiring a digital marketing firm, is deductible.
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Insurance — Liability insurance for your landscaping business is deductible. You can also deduct the cost of qualifying personal health, dental, and long-term care insurance.
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Professional services — You can claim a deduction when you pay accountants, bookkeepers, lawyers, or similar professionals for their services.
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Rent or lease — Costs for renting or leasing equipment are also qualified business expenses
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Repairs or maintenance — Buying oil for your mower, paying to repair your leaf blower, or other maintenance and repairs are also deductible.
This is not an exhaustive list, and again, business expenses vary depending on the unique nature of your landscaping company. Working with a professional would help you know if you were claiming all the potential deductions available.
Keep in mind that you may need multiple tools to help with accounting for landscapers. For example, you may want to invest in bookkeeping software to track expenses from your bank statements, but you may also want to find an app that will count the miles you drive for your business.
4. Generate reports to improve decision-making
The right reports are critical for quality decision-making. With bookkeeping software, you can generate reports on profit and loss, accounts receivables, cash flow, and more. Then, you can use this information to guide your decision-making process.
For example, a cash flow statement shows you when you are most likely to have extra cash on hand, allowing you to identify when you will be able to invest in new equipment. An accounts receivables report shows your unpaid invoices so you can ensure you’re not letting unpaid bills slip past.
The right reports can help you ensure that your expenses are in line with revenue, which projects have the highest profit margins, which neighborhoods you make the most in, and a variety of other essentials.
5. Know when to hire professional help
New landscapers may only have a handful of clients and a few expenses. But as the business grows, the complexity of your finances will also change. You may add employees, invest in more expensive equipment, opt to be taxed as an S-corp, or encounter other complexities. Ultimately, you may need professional help for your accounting and other financial needs.
At Franco Blueprint, we create value for our clients. Our services streamline accounting for landscapers and improve the financial decision-making process. Contact us today to ensure you’re tracking the numbers correctly and optimizing your tax situation as much as possible.