FINANCIAL MANAGEMENT - RECORD KEEPING

You can keep records with a filing system, or if you’re computerized, you can eliminate much of the paperwork. Among the many records to be maintained are time cards, proposals, estimates, job-costing analyses, contracts, permits, tax records, payroll records, inventory, tool locations, and truck costs. Some of your records are required to be maintained for specific periods by various governmental agencies, such as the IRS. Your CPA can provide you with a listing of records and their retention periods.

Your bookkeeping system and the specific records it maintains will be many times established for the primary purpose of paying taxes and complying with governmental mandates, none of which are intended to help you manage your business for profit.

Your accounting system must be so constructed as to provide not only tax and mandated data, but financial management data as well. Remember, you’re not in business to pay taxes - you pay taxes because you’re in business! You’re going to be required to pay some taxes whether you make money or not. You’re in business to make a profit, not to pay taxes. Learn the difference between a bookkeeper, a CPA, a tax advisor, and a tax attorney. Learn the difference between tax evasion and tax avoidance. One is legal - the other is not! Tax avoidance is professional management in action.

Truck records should include operating, maintenance and repair costs. You can make accurate decisions about replacing trucks only when the cost of operating an older truck, including maintenance, exceeds the cost of payments or leasing on a new truck. A factor that contractors many times fail to include in determining truck costs is the lost time for labor when a truck is unavailable due to repairs or service.

NOTE: For other closely related topics, be sure to review the newsletters on Accounting (#38), and Budgeting (#44), in this series of articles on Financial Management.

Mike Holt’s Comment: This newsletter was extracted from my Business Management and Management Skills’ Workbook. Watch for our next newsletter, and as always, we encourage your comments and feedback. Send us your real-life experiences. Please respond to Barbara@mikeholt.com.

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