Trade Accounting
Understanding Trade Accounting and Common Issues Faced by Trades Businesses
As a tradesperson or business owner, managing your finances can be a challenging task. Whether you’re a plumber, electrician, builder, or involved in any other trade, having a reliable accounting system is essential to your business’s success. Trade accounting involves the specific practices and strategies that support the financial management of businesses in the trades industry. However, there are several common issues that tradespeople often face when it comes to accounting.
Let’s explore the unique aspects of trade accounting and some of the challenges businesses in the trades industry commonly encounter.
What is Trade Accounting?
Trade accounting refers to the specialised approach to managing the finances of businesses in the trades industry. Unlike traditional businesses, trade-based businesses often deal with irregular cash flow, project-based work, and complex invoicing schedules. Trade accounting ensures that income, expenses, and taxes are tracked accurately and efficiently, allowing business owners to make informed financial decisions.
In trade businesses, accounting often involves handling various aspects such as:
Invoicing and quoting for projects
Managing cash flow and ensuring timely payments
Taxation compliance, including GST (Goods and Services Tax) and PAYG (Pay As You Go) withholding
Accurate tracking of materials and labour costs
Superannuation and employee benefits
Common Trade Accounting Issues
While trade accounting helps businesses stay on top of their financial records, there are several challenges that tradespeople face:
1. Irregular Cash Flow
Trade businesses often face challenges with inconsistent cash flow due to the nature of project-based work. For example, a builder might receive payments in stages based on milestones, and delays in these payments can impact their ability to pay suppliers and employees on time.
Solution: Working with a trade accountant can help implement strategies to better manage cash flow, such as setting up clear payment terms, using invoicing systems, and forecasting future revenue and expenses.
2. Difficulty Tracking Expenses
Tradespeople often have to juggle numerous expenses, including tools, materials, and labour costs, which can be difficult to track manually. Missing an expense or not recording it correctly can lead to tax errors, which could result in costly penalties.
Solution: Implementing cloud-based accounting software can streamline the process by allowing you to track expenses in real-time and capture receipts digitally. This reduces the risk of missing or inaccurately reporting expenses.
3. Tax Compliance Challenges
Tax obligations can be a complicated aspect of running a trade business. Tradespeople need to manage their GST registration, ensure they’re filing the correct BAS (Business Activity Statements), and ensure they are meeting PAYG requirements for employees. Failing to stay compliant with tax laws could lead to penalties.
Solution: A trade tax accountant can help manage tax obligations by setting up processes for regular tax reporting, ensuring all claims are legitimate, and assisting with BAS preparation. They can also advise on tax deductions specific to the trades industry, such as tools, vehicle expenses, and work-related travel.
4. Employee Payroll and Superannuation
Managing payroll for employees is another challenge faced by many trades businesses. Trades businesses often have fluctuating workloads, making it difficult to manage employee pay and entitlements, including superannuation.
Solution: Working with a qualified accountant can help you navigate the complexities of payroll and superannuation, ensuring you meet all compliance requirements, including submitting super payments on time.
5. Project Costing and Profit Margins
Understanding the true cost of a project is crucial for trades businesses to remain profitable. Many business owners struggle with accurately calculating project costs due to overlooked variables, such as overhead, material fluctuations, and labor costs.
Solution: A trade accountant can assist with project costing methods, helping you track the costs of each project in real-time, set accurate margins, and ensure you are pricing your services competitively while maintaining profitability.
How Can CBW Accounting Help Trades Businesses?
At CBW Accounting, we specialize in supporting trade-based businesses. Whether you need help with tax compliance, streamlining your invoicing and expense tracking, or managing payroll for your team, our expert accountants are here to guide you every step of the way.
We understand the unique challenges faced by tradespeople and can help set up systems that allow you to focus on what you do best – running your business.
Get in Touch with CBW Accounting and Taxation Today
If you’re a tradesperson looking for expert accounting support, don’t let accounting issues hold you back. Contact CBW Accounting and Taxation today for personalized advice and support tailored to your trade business.
Whether you need help with tax planning, cash flow management, or any other accounting services, we’re here to help you grow your business and stay compliant with the latest regulations.