Bookkeeping for electrical businesses

Bookkeeping for electrical businesses

The construction industry in British Columbia is one that is highly complex and fast-moving.

Due to the fact that this is a fast-paced and agile market, it is important that niches and companies within this industry carefully track their books.

This means keeping a close eye on expenses, payroll, tax accounting, revenues, and generally accounting practices.

Specifically, within this industry, certain niches need closer attention than others.

One of those niches is the electrical industry.

That’s why in this article, we want to discuss the importance of bookkeeping for electrical businesses. This includes understanding why it is important for electricians to pay close attention to various areas of their bookkeeping, and why it’s so important for electricians to hire bookkeepers for their businesses.

Why bookkeeping in the electrician market is unique

First, however, we want to highlight why exactly the market for electrician businesses is unique, compared to so many others in British Columbia.

We’ve compiled a list of the top 5 reasons as to why bookkeeping is so unique for electrical and electrical professionals in British Columbia.

  1. GST and HST rules. In British Columbia, electricians and electrical companies are required to collect GST/HST on their services. This means that they need to keep accurate records of their sales and expenses to ensure that they are collecting the correct amount of GST/HST and remitting it to the government on time.
  2. Licensing requirements. Electricians in British Columbia are required to hold a valid electrical contractor’s license to operate their business legally. This means that they need to keep track of their licensing fees, insurance payments, and other expenses related to maintaining their license.
  3. Safety regulations. Electricians and electrical companies need to comply with various safety regulations in British Columbia. This means that they need to keep track of their safety equipment, training programs, and other expenses related to maintaining a safe workplace.
  4. Project management. Electricians and electrical companies often work on multiple projects at the same time. This means that they need to keep track of their expenses and revenues for each project separately to ensure that they are making a profit and to manage their cash flow effectively.
  5. Differences in payroll. Compared to other industries and markets in British Columbia, Electricians often have to deal with so many different payroll regulations, forms, and remittances. The key reason being that many companies don’t just have to account for employee benefits and salaries. They often employ contractors, trades, subcontractors, temp workers, and full or part-time workers that all require very different payroll regulations to be following – making bookkeeping more difficult than in most industries.

Overall, bookkeeping is crucial for electricians and electrical companies in British Columbia to comply with the regulations and to operate their business profitably.

Why bookkeeping is important for electricians

Given the uniqueness of the electrical industry, it’s also important to understand exactly why bookkeeping is so important for electricians.

Bookkeeping is an essential aspect of running any business, and it is especially crucial for electricians and electrical companies in British Columbia. At a high level, bookkeeping helps these businesses track their income and expenses, maintain financial records, comply with tax laws and regulations, and manage their cash flow effectively.

Firstly, electricians and electrical companies in British Columbia are required to collect GST/HST on their services, and as discussed this is different than many other companies in other industries.

This means that they need to keep accurate records of their sales and expenses to ensure that they are collecting the correct amount of GST/HST and remitting it to the government on time. Without proper bookkeeping, they may end up undercharging or overcharging their customers, which can result in penalties and fines from the government.

Secondly, electricians in British Columbia are required to hold a valid electrical contractor’s license to operate their business legally.

In other words, it means that electricians need to keep track of their licensing fees, insurance payments, and other expenses related to maintaining their license – that is otherwise not seen in other markets.

Not only this, but it also means that all contractors, trades and sub trades, and other groups related, need to have their licenses and insurance in place before working – which further adds to the payroll confusion of the industry.

Proper bookkeeping ensures that these expenses are recorded accurately and that the business is in compliance with the licensing requirements.

Thirdly, safety regulations are crucial for electricians and electrical companies in British Columbia.

These businesses need to comply with various safety regulations, which means that they need to keep track of their safety equipment, training programs, and other expenses related to maintaining a safe workplace.

Proper bookkeeping ensures that these expenses are recorded accurately, and the business can demonstrate compliance with safety regulations in case of an audit.

Finally, project management is an essential aspect of running an electrician or electrical company.

These businesses often work on multiple projects at the same time, which means that they need to keep track of their expenses and revenues for each project separately. Accurate bookkeeping ensures that the business is making a profit on each project and can manage its cash flow effectively.

In short, bookkeeping is a critical aspect of running an electrician or electrical company in British Columbia. Proper bookkeeping helps these businesses comply with tax laws and regulations, maintain financial records, manage their cash flow effectively, and demonstrate compliance with safety regulations. It is essential for electricians and electrical companies to prioritize bookkeeping and ensure that they have accurate records of their income and expenses.

Top General Bookkeeping Tips for Electrical Businesses

Due to the nuances in the industry, and the overwhelming importance for bookkeeping accuracy in the electrical industry, we’ve compiled a list of the top 7 tips for electricians to effectively manage their bookkeeping:

  1. Keep detailed records. Electrical businesses should keep accurate and detailed records of all their financial transactions. This includes receipts, invoices, bills, and bank statements. These records should be organized and kept in a safe place to facilitate easy access and retrieval when needed.
  2. Separate business and personal finances. Electrical businesses should separate their business and personal finances. This means having separate bank accounts, credit cards, and financial records for the business. Mixing personal and business finances can lead to confusion, errors, and can make it challenging to track business expenses and revenues accurately.
  3. Use accounting software. Using accounting software can streamline bookkeeping processes and help electrical businesses manage their finances more efficiently. Accounting software allows businesses to track income and expenses, generate financial statements, and automate many bookkeeping tasks, such as invoicing and bill payments.
  4. Reconcile accounts regularly. Electrical businesses should reconcile their bank accounts and credit card statements regularly to ensure that their financial records are accurate and up-to-date. Reconciliation involves matching transactions in financial records to those in bank and credit card statements and identifying any discrepancies.
  5. Keep track of GST/HST. Electrical businesses are required to collect GST/HST on their services in British Columbia. It is crucial to keep track of the GST/HST collected and paid and to ensure that the correct amount is remitted to the government on time.
  6. Maintain proper documentation. Electrical businesses should keep proper documentation of all their financial transactions. This includes receipts, invoices, purchase orders, and bank statements. Documentation helps businesses to track their expenses accurately and to provide evidence of transactions in case of an audit.
  7. Seek professional help. Electrical businesses can benefit from seeking professional help from bookkeepers or accountants to manage their finances effectively. Professional bookkeepers or accountants can provide guidance on tax laws and regulations, assist with bookkeeping tasks, and help businesses stay compliant.

Following these top 7 tips will help you as a small business owner within the electrical industry better manage and take care of bookkeeping in a more efficient and organized manner.

Top Payroll Tips for Electrical Businesses

We’ve talked a lot about the need for bookkeeping in this article, and something that we’ve come back to a few times is the nuances in payroll accounting and tracking payroll in the electrical business industry.

So, we’ve compiled a list of the top tips for business owners to follow in order to accurately and properly account for payroll on the books as an electrical company:

  1. Classify workers correctly. It is crucial to classify workers correctly as employees or independent contractors to ensure that they are paid and taxed correctly. Misclassifying workers can lead to legal and financial issues, including fines and penalties.
    Proper classification of workers also means that proper payroll forms are required to account for earnings, deductions and reporting. Some workers will require T4A forms, whereas others will require a T5018 form to report income. Proper classification will be the difference between a clean monthly remittance, or incurring unnecessary dues and fees.
  2. Calculate and withhold taxes accurately. Contractors, businesses, and subcontractors in the electrical industry are required to withhold taxes from their employees’ paychecks. This includes federal and provincial income tax, Canada Pension Plan (CPP), and Employment Insurance (EI). Accurate calculation and withholding of taxes can help avoid penalties and ensure compliance with tax laws and regulations.
  3. Understand payroll deadlines. Payroll deadlines for remitting taxes and issuing paychecks to employees vary based on the size of the business and the number of employees. It is essential to understand and adhere to these deadlines to avoid penalties and interest charges.
  4. Keep accurate records. Keeping accurate payroll records is crucial for businesses and contractors in the electrical industry. This includes keeping track of hours worked, vacation and sick days, and employee wages and deductions. Accurate record-keeping can help businesses avoid disputes with employees and ensure compliance with tax laws and regulations.
  5. Use payroll software. Using payroll software can help businesses and contractors manage their payroll effectively. Payroll software can automate payroll calculations, track employee hours, and generate pay stubs and tax forms.
    Many digital accounting tools like QuickBooks, ProCore, CMiC, and other industry-specific tools will be immensely helpful in tracking expenses, revenues, payroll, and remittances.
  6. Monitor overtime hours. Overtime pay is required for employees who work more than eight hours a day or 40 hours a week in British Columbia. Monitoring overtime hours can help businesses and contractors avoid disputes with employees and ensure compliance with labor laws. Furthermore, monitoring hours for contractors, sub trades, and other partners who may not be internal employees will also make a difference in how much is being paid out.

Why it’s best to outsource bookkeeping

It’s clear from the above lists that there are many small details that businesses and business owners need to be aware of when bookkeeping in the electrical industry.

However, the problem with this is that if any bookkeeping is done improperly (for example, payroll is not remitted on time, taxes are not properly accounted for, or subtrade hours are not properly tracked), there will be significant penalties for small businesses.

That’s why we always recommend small and medium businesses in the electrical industry always work with a professional.

Here’s our top reasons why:

  • Time-saving

    Bookkeeping can be time-consuming, and outsourcing it to professionals allows electricians to focus on their core business activities. By freeing up time and resources, they can increase productivity and profitability.

  • Cost-effective

    Outsourcing bookkeeping can be cost-effective for electricians in British Columbia. Hiring and training an in-house bookkeeper can be expensive, and outsourcing allows them to avoid these costs.

  • Expertise

    Professional bookkeepers have the knowledge and expertise to manage bookkeeping tasks accurately and efficiently. They keep up-to-date with tax laws and regulations and can provide guidance on financial matters.

  • Accuracy

    Bookkeeping professionals use the latest technology and software to ensure accuracy in record-keeping, financial reporting, and compliance with tax laws and regulations.

  • Reduced errors

    Bookkeeping errors can lead to financial loss and legal issues. By outsourcing bookkeeping to professionals, electricians can reduce errors and ensure that their financial records are accurate and up to date.

  • Access to real-time financial information

    Bookkeeping professionals can provide electricians with real-time financial information, such as income statements, balance sheets, and cash flow statements. This information can help electricians make informed financial decisions and plan for the future.

  • Peace of mind

    By outsourcing bookkeeping to professionals, electricians can have peace of mind knowing that their financial records are accurate, up-to-date, and compliant with tax laws and regulations. This can reduce stress and allow them to focus on growing their business.

However, it’s important to find the right bookkeeper to pair with your business.

The top things that we always recommend looking for include:

  • Experience within the industry,
  • Experience with payroll and tax accounting (which, is why we wanted to especially discuss that), and
  • Knowledge of leading-edge accounting technology.

Why we always recommend looking for these few things is that if an accountant or bookkeeper lacks any of these (even if they’re cheaper), it could leave you in a bigger mess than you started in – and you’d have paid for unnecessary mistakes.

That’s why we recommend taking your time to find the right accounting partner who takes a vested interest in the growth and success of your business and sees that your books are taken care of as well as you take care of your business.

At Valley Business Centre – Bookkeeping & Payroll, we understand accounting for the construction industry, and we further understand what it takes to succeed in the electrical market. For over 30 years, Valley Business Centre – Bookkeeping & Payroll has been providing comprehensive bookkeeping, tax, payroll, and remote bookkeeping services to our clients in Whistler, Squamish, the Sea to Sky Corridor and metro Vancouver B.C. areas. Valley Business Centre provides reliable and effective services to all clients.

Disclaimer

This article is written for informational purposes only. It is current at the date of posting and changes to laws and regulation may result in the information becoming outdated. It is not intended to provide legal, tax, or financial advice. It is recommended that readers get advice from a tax professional before making any final decisions.

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