Bookkeeping Basics for Tradies

While software has replaced the leather-bound ledgers of the past, bookkeeping is still an essential task for modern business owners. 

‍

Accurate, up-to-date financial records are vital for running a small business. They let you keep tabs on spending, help you plan and budget, avoid cash flow issues and identify payment issues that could be costing you money.

‍

Even more importantly, well-kept books are a must when it comes to completing accurate tax returns and working with lenders to secure finance.

‍

Below, we share essential bookkeeping tips tradies need to keep on top of. 

‍

Bookkeeping basics

1. Recording means keeping a record of every incoming and outgoing transaction.
2. Reconciling involves checking transaction data against bank statements to make sure everything matches up. This helps you identify errors or late payments — or in some cases, fraudulent activity.

Bookkeeping in a small business also includes accounts receivable, accounts payable and payroll — that is, sending outgoing invoices, paying incoming bills and paying staff.

‍

Simplifying bookkeeping with software

In the past, business owners recorded sales in a ledger, kept paper receipts for business purchases, and cross-referenced bank statements by hand.

Now, accounting software can take on many of those tasks.

• Recording sales: information flows straight from a point-of-sale or invoicing system into accounting software.
• Tracking purchases: business purchase data can be automatically recorded.
• Reconciliation: is quicker and more accurate.
• Invoicing and bill payments: can be automated.

Need help getting your books under control? Get expert bookkeeping support from our accounting team.

Keep an eye on cash flow 

Cash flow is basically the inflow and outflow of cash. For example, when your customers pay you, there is a positive inflow of cash, versus when you pay your staff, there is a negative outflow of cash. 

The mistiming of cash flow can lead to all sorts of operational issues for tradies. You might be doing plenty of jobs and making plenty of profit, but without keeping an eye on your cash flow, you could struggle to pay your suppliers or staff when you need to. This is hugely problematic because, without supplies or staff, you’ll struggle to continue trading!

‍

Cash flow gets trickier to manage when credit terms are introduced. If you’re completing jobs and allowing your customers to pay your invoices on terms of 14, 30, or even 45 days, where will you find the cash to pay your staff their weekly wage? This is where keeping cash reserves available or using business finance helps with managing cash flow. 

Record your vehicle expenses

Working as a tradie generally means your vehicle use and expenses are high. Because these expenses are associated with the day-to-day running of your business, you’ll likely be entitled to a tax deduction, so it’s important to properly record your expenses. 

Keep a logbook

If you’re using the logbook method to claim a deduction for vehicle expenses, you’ll need to:

• Record your movements over 12 continuous weeks.
• Include the destination and purpose for each trip, including the odometer reading at the start and end of each trip.
• Include odometer readings for the start and end of the logbook period to tally up the total kilomotres travelled over the recording period. 

‍

For the logbook method, you’ll need to keep some extra records:

• Receipts for your fuel and oil expenses.
• Receipts for other vehicle expenses. For example, registration, insurance, services, tyres, and loan interest charges.
• A record of the purchase price of the car to determine the depreciation.

‍

With the right records kept, your accountant can help you work out the amount you can claim as a tax deduction. 

Cents-per-kilometre method

A simpler method of calculating deductions relating to vehicle expenses is the cents-per-kilometre method. However, only a maximum claim of 5,000km per car is available, meaning the deduction may be much less than the logbook method if you travel more than 5,000km per year (which most tradies do!). 

‍

To calculate your deduction using this method, you simply multiply the number of work-related kilometres travelled in the car by the rate per kilometre for that income year. For the 2024-25 income year the rate is 88 cents per kilometre. With this method, the rate covers all other vehicles expenses, including registration, services, decline in value, etc. So it’s simple to use, but generally results in a much lower tax deduction than the logbook method. 

Keep track of equipment expenses

As a tradie, you’ll probably spend a lot on purchasing supplies and equipment. To claim a tax deduction for these purchases, it’s essential you keep a record of your purchases. This includes PPE, trade supplies, education, tickets, permits and tools. 

‍

To claim a deduction, you’ll need to keep receipts. Online accounting software is a much easier way to keep track of your purchases and receipts rather than the old shoebox method. 

Understand payroll obligations

If you have employees or contractors working for you, it’s essential to stay on top of the payroll compliance. As a minimum, you’ll need to ensure: 

• Your team are getting paid the correct amount.
• You understand the superannuation guarantee requirements. For the 2024-25 financial year, the compulsory superannuation rate is 11.5%.
• The correct amount of tax (PAYG withholding) is being withheld from their pay.  
• You have appropriate insurance coverage, including WorkCover.

‍

There’s a lot involved in ensuring your payroll operations are compliant. If you’re unsure of any aspects involved, we’re always happy to help. 

‍How can we help?

At Bonerath & Co. our accountants are experts in bookkeeping for tradies. If you need more advice or help with your bookkeeping, please contact our team today. 

‍