Bookkeeping for Landscaping Business: How to Manage Your Books

Bookkeeping for landscaping business isn’t much different than most other businesses. It’s all a matter of understanding the tasks and accounts you need to track. 

What is Bookkeeping for Landscaping Businesses?

Bookkeeping for any business is the systematic recording of financial transactions, categorizing and summarizing them. It shows a clear picture of a business’s financial health.

Effective bookkeeping involves recording all revenue from services, and tracking the costs of all materials, labor, equipment, and overhead. This helps you to anticipate cash needs, manage payments, and avoid financial shortfalls.

With accurate records, you can maintain good cash flow and generate accurate financial statements. Then, you can make strategic business decisions using your profit and loss statement, income statement, balance sheet, and cash flow statement.

Setting Up Your Landscaping Bookkeeping System

Choosing the Right Method in Bookkeeping for Landscaping Business

Cash basis accounting records transactions when actual cash comes in or goes out. It’s very simple to understand and maintain, but can distort the true financial picture of the business. Moreover, it doesn’t comply with generally accepted accounting principles (GAAP).

Accrual basis accounting records income when it’s earned and expenses when incurred, whether paid yet or not. This gives a more accurate picture of financial performance, which is better for financial planning and decision-making. This is better for growing businesses, although it’s more complex to implement and maintain.

We recommend accrual accounting for your landscaping business, unless you are very small and don’t have a lot of recurring expenses or long-term projects.

Selecting Bookkeeping Software

If you prefer to use general accounting software, we recommend the more popular tools:

• QuickBooks is the most robust option with features tailored to small businesses, including job costing, invoicing, and expense tracking.
• Xero is a user-friendly tool with various integration capabilities.
• FreshBooks is great for invoicing and time tracking, and also offers basic accounting features.

If you want to check out landscaping-specific software, you can try:

• Aspire is a comprehensive business management app that includes job management and customer relationship management.
• Jobber is a tool that has basic accounting features and combines job scheduling, invoicing, and payment processing.
• Kickserv is a tool suite for landscaping businesses that includes accounting, CRM, and marketing features.

Smaller businesses can use simpler software, but more robust options are better for easier scaling. Consider your budget, too, and the tool’s security features and customer support. Don’t scrimp on the features you need.

Creating a Chart of Accounts

Income Accounts

1. Services revenue like lawn mowing, shrub trimming, tree care, landscaping design, and irrigation installation.
2. Sales revenue, like plant sales, material sales, and equipment rentals.

Expense Accounts

1. Cost of Goods Sold, like plants, materials (soil, mulch, fertilizer, etc.), and landscaping supplies.
2. Labor costs, like wages and salaries, payroll taxes, workers’ compensation insurance, and employee benefits.
3. Operating expenses, like office and equipment storage rent, utilities, business and property insurance, advertising and marketing, office supplies, vehicle expenses, equipment repairs and maintenance, professional fees, licenses and permits, travel expenses, bank charges, and miscellaneous expenses

Asset Accounts

1. Current Assets: Cash, Accounts receivable, Inventory, Prepaid expenses
2. Fixed Assets: Equipment, Vehicles, Office equipment, Land and buildings

Liability Accounts

1. Current Liabilities: Accounts payable, Salaries payable, Taxes payable, Notes payable.
2. Long-Term Liabilities: Notes payable, Loans

Equity Accounts

1. Owner’s capital
2. Owner’s drawings

Managing Income and Expenses in Landscaping

Tracking Income

Whether you choose manual bookkeeping for landscaping business or use accounting software, the general steps are:

1. Create and send detailed invoices for services rendered. 
2. Record the invoice, debiting Accounts Receivable and crediting Landscaping Services Revenue.
3. Record payments as you receive them, debiting Cash and crediting Accounts Receivable.

Note that software automates much of the process once you enter the invoice and payment details.

Recording Expenses

Bookkeeping for landscaping business deals with a variety of expenses to operate smoothly.

1. Direct costs are expenses for specific projects or services, like subcontractor fees and materials. 
2. Indirect costs are general business expenses like overhead, insurance, and business permits. 
3. Some business models also incur additional costs, like paid time off for employees and industry association dues. 

Managing Receipts and Invoices

Effective bookkeeping for landscaping business usually means automating invoice and receipt management. It makes for more accurate records and better tax compliance. 

1. Take advantage of receipt capture apps like Shoeboxed, Expensify, and Receipt Bank. 
2. Choose cloud-based accounting software with built-in receipt management or easy integrations with receipt capture apps.
3. If you need signatures, get electronic signatures for digital receipts.
4. Establish and maintain a digital filing system with consistent naming conventions. 
5. Regularly back up your files.
6. Use software to generate expense reports and implement a workflow to approve them for better control.
7. Organize documentation with tax compliance in mind. 

Handling Payroll and Employee Expenses

Payroll Management for Landscaping Businesses

Bookkeeping for landscaping business is not complete without compliance with labor laws. You must either get a solid understanding of them, or hire a professional to help you. Here are the basics you must follow:

• Make sure you’re paying employees at least the minimum wage required by law.
• Understand what rules apply to overtime pay eligibility and rates. 
• Know if you’re hiring employees or independent contractors and how this affects tax withholding and labor laws.
• Withhold the correct federal, state, and local income taxes for employees.
• Pay all the payroll taxes you’re responsible for, like Social Security, Medicare, and unemployment.

Tax Obligations and Preparation

Understanding Tax Requirements for Landscaping Businesses

You need to file an income tax return for your business as a sole proprietorship, partnership, corporation, or LLC. If you’re self-employed, you also need to pay Social Security and Medicare taxes.

If you have employees, you need to withhold income tax, Social Security, and Medicare taxes from their paychecks. Then, you need to pay the employer portion of these taxes, plus federal unemployment tax (FUTA) and maybe state unemployment tax, too.

Some states have other corporate or individual income taxes, as well as sales tax for products and materials sales. You might need to pay property taxes on business equipment and real estate, plus excise taxes and environmental fees or taxes.

Hiring a Tax Professional for Your Landscaping Business

Many businesses don’t fully understand the complexities of their tax obligations or financial transactions, and that’s ok. In these cases, we recommend hiring a professional to provide expert guidance.

You can also benefit from some help if you don’t have the time to dedicate to proper bookkeeping and tax compliance. Outsourcing specialized areas can also minimize your risk of errors, penalties, and audits.

Avoiding Common Bookkeeping Mistakes

1. Keep a consistent system for recording transactions and reconciling accounts. 
2. Don’t procrastinate on bookkeeping tasks.
3. Never mix business and personal expenses. 
4. Use detailed receipts and categorize expenses accurately. 
5. Stay updated on tax laws, deadlines, and requirements. 
6. Generate and review financial statements at least quarterly to identify trends, profitability, and areas for improvement. 
7. Create a cash flow budget to anticipate financial needs and monitor closely.

Leveraging Virtual Assistants for Landscaping Bookkeeping

Hiring a virtual assistant to take care of bookkeeping for landscaping business can be a total game-changer. 

First, hiring a professional takes you away from mundane tasks so you can concentrate on core business activities. When you delegate these time-consuming tasks, you can improve overall efficiency in your business, too.

Second, hiring virtually means that you don’t need to pay for office space, equipment, or employee benefits. You can also add or remove players quickly and easily as your business needs change.

Third, hiring experienced helps means adding specialized skills to your arsenal. This reduces the chances of errors ensures accuracy in your financial records. Bookkeeping professionals also tend to stay more updated on tax laws and regulations.

Frequently Asked Questions

What bookkeeping software is best for small landscaping businesses?

The best bookkeeping software is user-friendly and affordable. QuickBooks Self-Employed is a great starter tool for small businesses with simple structures. FreshBooks is another tool that’s ideal for smaller businesses that prioritize invoicing and time tracking. Xero works for growing businesses, since it offers a good range of basic features.

Zoho Books has a more comprehensive range of features, including invoicing, expense tracking, inventory management, and project management. This is a good option for businesses with multiple services. Wave Accounting has free invoicing and expense tracking, and you can pay for additional features like payroll.

How often should I update my bookkeeping records for a landscaping business?

Ideally, you should update your bookkeeping records daily or at least weekly. This ensures that your financial data is accurate and up-to-date. The more complex your business, however, the more frequent your updates should be.

What are the most common tax deductions for landscaping businesses?

• Equipment and Supplies
  • Mowers, trimmers, blowers, shovels, rakes, fertilizers, pesticides, and other landscaping tools and materials.
  • Fuel, vehicle repairs, maintenance, and depreciation.
  • Travel expenses
• Operating Expenses
  • Office space, equipment storage, and shop rentals.
  • Electricity, water, gas, and internet.
  • General liability, property, vehicle, and workers’ compensation insurance.
  • Advertising and marketing costs.
  • Office supplies.
• Employee-Related Expenses
  • Wages, salaries, and payroll taxes. 
  • Employee benefits.
• Other Deductions
  • Education and training costs. 
  • Professional fees for an accountant, lawyer, and consultants.

How can I ensure my landscaping bookkeeping records are audit-proof?

Keep complete and accurate records of all your financial transactions and related documentation in a proper chart of accounts. Categorize everything correctly and regularly back up all your financial data.

Stay updated on federal, state, and local tax laws and regulations, or hire a professional who can keep you compliant. Make sure you follow employment laws regarding wages, overtime, and worker classification as well as industry-specific bookkeeping practices.

What should I look for when hiring a virtual bookkeeping assistant for my landscaping business?

Choose an assistant who demonstrates a strong understanding of accounting principles and practices as well as proficiency in accounting software. They must show great attention to detail for accurate and organized record-keeping. 

Check that the candidate has effective communication skills. Look at candidates who have experience doing bookkeeping for landscaping business. 

Above all, your bookkeeper must be trustworthy and handle sensitive financial information responsibly.

What Is AccountsBalance?

AccountsBalance is a monthly bookkeeping service specialized for agencies & SAAS companies.

We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.

You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.

Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.

And here’s some free resources:

• Entrepreneur Bookkeeping Checklist
• Monthly Finance Meeting Agenda

In Summary

Proper bookkeeping for landscaping business means keeping track of all the details and storing backups of everything. When you have accurate and complete records, everything else becomes easier and safer.