Organizing Pest Management Finances
As a busy owner or pest management firm 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 to manage the accounting function this can be a huge source of frustration. The key is to stay organized. The following are 5 important things you can do to get organized and get your pest management finances under control.
Talk to a 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. The overall goal of your CPA should be to help you accumulate and preserve wealth. Saving taxes is just a small part of this. Your accountant should be a valued member of your management team.
Look at your Business Entity structure – For the most part, there are three business structures that a PMP can organize his firm. They are Sole Proprietorship, Partnership or a Corporation. A fourth choice that is an excellent fit as to the way we carry on business would be a Limited Liability Company (LLC). For accounting purposes an LLC can be set up like either of the first three and taxed accordingly. Under the current law, S-Corporations in most cases will minimize federal taxes. Consult your accountant or lawyer as they are in the best position to make the assessment as to federal tax consequences as well as consider your state tax laws and how this fits into your overall picture.
Separate Your Personal and Business Pest Management Finances – Seems obvious – right? For legal purposes and to keep tax records straight you want to 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 your business expenses and revenues are transacted in your business account. Personal items like home mortgage and other personal items should be transacted using your personal account. Another very simple idea that will keep you and your business separate is to get a personal credit card as well as one for business and make sure that you separate your credit card purchases using the proper card.
Use QuickBooks to get organized –QuickBooks is an extremely powerful program that can manage revenues, expenses, payroll, cash flow and budgeting. Having accurate and timely information is paramount to success in the pest business and QuickBooks 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. that is 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 5 items discussed above will help you maintain this financial visibility.
This article was originally featured in PMP Magazine