In the electrical industry, we tend to focus on the materials we use, the trucks we drive, the employees we hire, etc. But when was the last time you looked at your income statement or your balance sheet? Do you look at these reports every month, every quarter, or every year? If you’re an owner, do you share financial information with employees?
To run a profitable electrical business, you must know your numbers. Owners should be able to access their income statement at any time. If not, acquire a system that allows this, or get the information from your accountant.
The income statement shows you the total income versus the expenses of the company. When you look at it, what do you see? I look at the bottom line or the final income of the report first, and then other key areas such as sales, material, and labor. I have a cloud-based system that allows me to view our finances 24/7.
Employing a good accountant is also key. I’m not talking about the one you see once a year at tax time; you need an accountant who can help you every month, if needed. The accountant must review your books at least once a quarter to assess how business is going.
Most electricians love their work, but when it comes to financials they don’t pay attention to the numbers or let the office help or accountant monitor it. If you have the capability to do comparative reports, it’s very helpful. Comparative income reports can be run where you are comparing year-over-year or other set parameters. This report will catch irregularities in items that you may miss, especially if they should be relatively consistent over a certain period. The balance sheet can also be comparatively reported. The balance sheet tells you what your assets are as well as liabilities and net worth. The income statement and balance sheet go hand in hand. If you have a relationship with a bank, these are the two items they want.
I mentioned you may have other employees monitoring your company financials. While this may work, it can also be a recipe for disaster. When people have access to your company’s money, bad things can happen. Cash, checks, and credit cards must be closely monitored.
If you have a bookkeeper other than yourself, here are a few tips and red flags to keep an eye on:
• Always sign your own checks.
• Always use an outside accounting firm for auditing.
• Does your bookkeeper insist on doing all the financials for the company?
• Does your bookkeeper take company records home?
• Does your bookkeeper prefer to work alone or after hours?
• Are things misfiled and messy, especially bank or credit card records?
• Does your bookkeeper insist on getting the mail?
• Does your bookkeeper rarely go on vacation or insist no one touch the books while he or she is gone?
• Does your bookkeeper have credit card information and the ability to order cards without your approval?
• Can your bookkeeper order checks without your approval?
• Do you monitor all your deposits, especially cash ones?
• Does your bookkeeper have the ability to change customer invoice amounts versus deposit amounts?
We all want to trust everyone in our companies, but you must have a checks-and-balances type system. Don’t let one person be the sole bookkeeper other than the owner. If you’re the owner and bookkeeper, then have another party audit your books.
Wise holds an A.S. degree in Electrical Engineering and is licensed in N.C., S.C., and Va. In addition to being a college electrical instructor, N.C.-licensed real estate broker, and former NASCAR race car driver, Wise owns and operates Mister Sparky in Charlotte and Cherryville, N.C. He can be reached at [email protected].
