Are your books set up to give you reporting you want? We’re still early in the year and for many contractors, this is your slower time, so it’s a good time to make those adjustments. One that I always ask my clients about is Classes. Classes can simplify your reporting, helping you make better business decisions.
Classes (perhaps short for classification?) in QuickBooks can really help you evaluate different components of your business more easily. I find businesses are often doing this by having extensive income and cost of goods accounts, but Classes can often not only simplify but make it easier to see what’s really going on in the business when you run a Profit & Loss by Class and see those side-by-side comparisons. I think of Classes usually as profit centers – so what “profit centers” do you have? Examples could be:
- If you’re a landscaper, then maybe your divisions – maintenance, design/build, lighting, irrigation
- Painting/decorating companies might have wallpaper as a class and painting as another. Construction might be new construction vs remodel
- If you have multiple locations, then perhaps each site is a class
- Some of my clients use State where work was done
- If you have partners then maybe each partner is a class
- If you sell and service products, then maybe one class is the sale of products and the other is the servicing of those products.
You can also have subclasses. While I don’t like these as well because you can’t collapse columns in QuickBooks (but you can in Excel), that may be useful. Some examples:
- If you are a contractor using cost codes and each cost code has a labor, materials, subs, equipment, then maybe those could be sub-classes of the new construction vs remodel or vice versa
- Perhaps a decorating company wants to interior and exterior painting as subclasses of painting
- If you have multiple locations, then maybe the location is the main class and the departments or divisions are the subclasses.
Even if you use Classes already, perhaps it’s time to revisit them. I found in my own business, that as I picked up different revenue streams and dropped others, it made sense to change.
So what would you like to compare in your business? Contact our office if you would like assistance.