How to Use your Bookkeeping to Make More Money

Moselyn Kingson
Dec 25, 2024
4 min read

Most contractors look at bookkeeping as something they have to do just to file taxes. However, if you’re serious about running a profitable business, bookkeeping is your most powerful tool for making better decisions, maximizing profits, and scaling strategically. Here’s how to leverage your bookkeeping data to generate real results for your business.

Step 1: Identify Your Most Profitable Services and Jobs

Not all jobs are created equal. The first step to making more money is understanding which services drive the most profit.

Analyze Your Profitability

You need to analyze your Profit & Loss (P&L) statement by class to identify your high-margin services. Here’s how to do it:

Run the P&L by Class Report in QuickBooks Online: This report breaks down your income and expenses by service type or job category.
Express Each Column as a Percentage of Income: By calculating gross profit margins for each service or job, you can see which generates the most return.

Run Year-Over-Year Comparisons

Don’t just look at this month or quarter. Analyze trends over time to understand which services consistently perform well. This insight allows you to promote high-margin services more aggressively while deprioritizing or repricing low-margin ones.

Why This Works: Promoting high-margin services means you’re making more money with the same resources, which is the fastest way to increase profitability.

Here is a video tutorial to give you an idea:

Step 2: Eliminate or Reprice Low-Margin Services

Once you’ve identified your most profitable services, the next step is to cut or adjust the ones dragging you down.

Low-Margin Services to Watch For

Some common examples of unprofitable services include:

1. Small Repair Jobs

Examples: Fixing a leaky faucet, patching drywall, or replacing a few tiles.
Why They’re Unprofitable: Travel time, sourcing materials, and client expectations of low cost make these jobs a waste of resources.
What to Do: Either stop offering them or charge a premium for convenience.

2. Custom or One-Off Projects

Why They’re Risky: Custom work takes significantly more time for planning and execution. Without precise pricing, you’re likely losing money.
What to Do: Only take these jobs if they build your portfolio or you can charge a premium to reflect the effort.

3. Seasonal Services with Low Demand

Examples: Pool cleaning in winter or lawn care during droughts.
Why They’re Inefficient: Low demand and inconsistent scheduling mean idle resources and high opportunity costs.
What to Do: Focus on high-demand, year-round services unless you need quick cash to fund other projects.

4. Specialized Equipment-Heavy Jobs

Examples: Renting cranes, concrete pump trucks, or specialized HVAC tools.
Why They’re Unprofitable: Equipment rental, transportation, and maintenance costs eat into your margins.
What to Do: Avoid unless the equipment is used frequently or you can justify the expense with a high rate.

Step 3: Focus on Your Most Profitable Clients

Not all customers are worth your time. Some take forever to pay, negotiate too much, or simply don’t bring enough value.

How to Identify Profitable Customers

Track Profitability by Client: Use QuickBooks to segment customers by revenue, frequency, and average payment time.
Eliminate Low-Value Clients: If a client consistently pays late or requires more effort than they’re worth, raise their rates or cut them loose.

How to Make Your Best Clients Even More Valuable

Offer Premium or Bundled Services: Create packages that combine services like painting, drywall repair, and trim installation to increase transaction size.
Upsell Related Services: For example, after completing a renovation, offer landscaping or interior decorating services.
Introduce Maintenance Contracts: Long-term agreements for repairs or inspections ensure steady cash flow and keep you top-of-mind for future work.

Step 4: Improve Job Bidding and Estimation

Underestimating costs is one of the easiest ways to lose money. Use historical data from your books to refine your bids.

How to Improve Accuracy

Compare Past Bids to Actual Costs: Look for patterns in overruns or underestimated expenses.
Set a Minimum Profit Target: Establish a baseline margin percentage you’ll never go below when bidding on jobs.

Why This Works: Better estimates mean higher margins and fewer surprises mid-project.

Step 5: Optimize Labor Costs

Labor is often one of the biggest expenses in a contractor’s business. Here’s how to keep it under control:

Subcontractors vs. Employees

Subcontractors: You pay them a fixed price, and they’re motivated to complete the work efficiently to maximize their profit.
Employees: Without the same profit incentives, employees may be less efficient, leading to wasted time and money.

Pro Tip: Analyze your labor costs regularly to determine the right mix of employees and subcontractors for your business.

Step 6: Control Expenses with Precision

Your profitability depends as much on cutting unnecessary costs as it does on increasing revenue.

Set and Monitor Monthly Budgets

Use QuickBooks’ Budget vs. Actuals Report to compare your actual spending to your planned budget.
Focus on cutting discretionary spending that doesn’t drive revenue.

Eliminate Waste

Cancel unused subscriptions or services.
Stop leasing equipment that isn’t being used.
Move all business spending to a dedicated account to improve tracking.

Step 7: Use Strategic Insights to Improve Job Profitability

Bookkeeping isn’t just about cutting costs—it’s also about finding new opportunities to grow revenue.

Expand High-Margin Services

If one service is particularly profitable, look for ways to offer complementary or related services.

Focus on Repeat Customers

Loyal customers are easier to sell to and cost less to acquire. Offer referral discounts or loyalty rewards to keep them coming back.

Partner Strategically

Collaborate with other trades (e.g., electricians and plumbers) to bundle services and attract more clients.

Step 8: Leverage QuickBooks for Maximum Insight

Your books are only as useful as the tools you use to analyze them. QuickBooks gives you access to reports like:

Profit & Loss by Class: Breaks down income and expenses by job or service.
Budget vs. Actuals: Tracks spending against planned budgets.
Customer Profitability Reports: Identifies your most valuable clients.

Take Action Today

If you’re not using your bookkeeping to drive decisions, you’re leaving money on the table. By analyzing your books and applying these strategies, you can:

Promote high-margin services.
Eliminate low-margin distractions.
Focus on the clients and jobs that truly grow your business.

See you in the next one!