If you're anything like the hard-working business owners I talk to, sometimes you look at your bank account and feel like money is leaking out. You know you spent money, but you are not exactly sure where it went. It feels like every month, there is a surprise bill or a cost that just keeps getting bigger. This guessing game about your expenses is stressful, and it stops you from making smart choices about your business.
This feeling of not knowing exactly where your cash goes makes you reactive. You might be scared to hire a new person or buy a piece of equipment because you are afraid of what other unexpected costs might pop up. We need to change that.
The core idea is simple: You can only control your expenses if you can clearly see them. Good expense tracking is the first step to bigger profits.
Stop the Expense Confusion
Many contractors make one big mistake: they mix their everyday business costs (called overhead) with the specific costs of running a job (job costs).
For example, if you buy gas for a truck, is that part of a specific job's cost, or is it a general business cost? If you mix them up, two bad things happen.
First, you think your jobs are more profitable than they really are because you are accidentally hiding the job costs in your general business spending. You are fooling yourself about your profit margins.
Second, your overall overhead costs look huge and scary, but you cannot figure out which expenses to cut because they are all jumbled together. You lose the chance to find the leaks and fix them.
We need to stop seeing all expenses as one big headache and start seeing them as separate groups we can manage. When you know where every dollar is going, you can find the leaks and make simple cuts. This gives you peace of mind and more money to invest back into your business.
This week, here’s one simple action you can take:
Sit down and look at the main categories in your accounting software (like QuickBooks). These are called your Chart of Accounts. Make sure you have clear, separate groups for everything. You need a group just for General Business Overhead (rent, office supplies, software) and a completely different group for Job Expenses (materials, crew labor, subcontractors). If your categories are messy, clean them up. Clean categories lead to clear decisions.