Author name: Justin Boyd

What Does an Hour of Your Labor Actually Cost? You had a great year. Revenue’s up, the calendar’s full, and by every measure you should be in better shape than last year. So why doesn’t the bank account look like it? If you’ve sat there running the numbers over and over trying to find where you went wrong, you’re not alone, and you probably didn’t do anything wrong. For a lot of owners, the answer starts with one number that almost nobody sits down and calculates: what an hour of labor really costs. Most owners price off the wage. If a tech makes $20 an hour, that’s the number that goes into the math, sometimes with a little padding for “taxes” or “burden.” The wage is only the starting point, though, and the real cost is a lot higher. If you’ve been pricing based solely on this cost, you’re in good company, since almost nobody gets taught this part. What Goes Into an Hour of Labor Once you add in the pieces that don’t show up on the paycheck, the number climbs fast: Add those up and a $20 an hour tech can easily cost $24, $26, sometimes more, before you’ve covered a single truck, a single tool, or a single hour of your own time running the business. Then There Are the Hours You’re Not Billing Even once you know the real cost, there’s a second gap that’s easy to miss. You’re paying for 40 hours a week, but you’re not billing 40 hours a week. Drive time, prep, loading the truck, slow mornings, and callbacks all have to happen, but nobody is paying for them directly. If a tech is paid for 40 hours but only bills 30, that’s 75% utilization, and it changes the math a lot. The real cost of each billable hour is the loaded labor cost divided by that utilization percentage. At 75%, every billable hour has to carry the cost of an hour and a third of pay. You can find your own utilization by comparing the hours on the timesheets to the hours billed (or clocked in at job sites) in your field software for the same week. A Real Example, Step by Step Here’s a scenario that shows how much this moves the number. Let’s say a company pays its techs $20 an hour with a $500 annual bonus, pays a 5% sales commission, and has fuel and supply costs that run about 15% of the job. Payroll taxes and insurance add about 18% on top of pay, techs bill about 30 of their 40 hours, and the company wants a 60% gross profit margin. Take a guess at what they should charge per hour before you keep reading. Most owners guess a lot lower than the answer. Step What happens Cost per hour 1. Start with pay $20 wage plus the $500 bonus spread across the year About $20.24 2. Load it Add about 18% for payroll taxes and insurance About $23.88 3. Adjust for utilization Divide by 75%, since only 30 of 40 paid hours get billed About $31.84 per billable hour 4. Price for everything else After a 60% margin, 5% commission, and 15% for supplies, labor can only be 20% of the price, so divide by 20% About $159 an hour That number stops people every time they see it, and it feels too high right up until you walk through the steps. The biggest jump is the last one, since once the margin, commission, and supplies each take their share, labor is only a small slice of what the customer pays. Many owners will guess around $80-$100/hour based on doubling or tripling the labor cost with taxes, but you can see mathematically that’s not even close to enough. Utilization Moves the Number More Than Almost Anything Using the same example, here’s what happens to the rate you need to charge when techs bill more of their paid hours: Billable hours out of 40 Utilization Rate needed 30 75% About $159 32 80% About $149 35 88% About $136 Getting each tech just two more billable hours a week drops the rate you need by about $10 an hour. So there are two ways to close the gap: raise the price, or raise utilization with tighter routes, better scheduling, and less time spent waiting on parts. Most businesses need a little of both. If you price by the job instead of by the hour, the same math still applies. Multiply the estimated hours by the rate you need, add materials, and that’s the floor for the flat-rate price. Why This Matters More Than It Seems Being off by even a few dollars an hour doesn’t look like much on a single job. But multiply that gap across every job, every tech, and every week of the year, and it’s often the biggest reason a business can have a great year in revenue and still feel broke. Let’s say you’re $15 an hour under and your techs bill a combined 6,000 hours a year. That’s about $90k that should have been profit. That gap between how hard you’re working and what’s sitting in the account is exhausting, and it can make you second-guess decisions that were never the problem in the first place. This one number is usually a big part of it, and the good news is that it’s a formula you can run, with no guessing involved. It’s worth re-running every year, or any time wages, insurance, or commissions change. Run Your Own Numbers We built a free Labor Rate Calculator that does this exact math for you. Enter your real wages, benefits, hours, and costs, and it gives you the rate you should be charging to hit your target profit. It only takes about two minutes, and it’s a lot faster than doing the table above by hand. Try the free Labor Rate Calculator

Why Am I Profitable but Broke? Your P&L shows the business made money last year. Your CPA may have even sent you a tax bill on that profit. And yet the checking account is about where it was twelve months ago, or lower. If you’ve been staring at both trying to figure out which one is wrong, the good news is that they’re probably both right. Profit and cash measure different things, and the gap between them is one of the most common things we see in the books of service businesses. Meet Dave I use a sample business in my talks called Two Guys in a Truck, owned by a guy named Dave. Dave’s company does about $1.2M a year. Here’s how last year looked: Amount Revenue $1.2M Operating income (before interest) $72k Net income (after interest) $60k How much the bank balance went up for the year $13k Dave made $60k in profit and ended the year with only $13k more in the bank. Nobody stole anything and the books aren’t wrong. The other $47k went to things that either don’t show up on the P&L or show up there differently. Where the Money Went Here’s one way Dave’s year could break down. Every business is different, but most of the gap lands in the same few places: Step Cash impact Net income +$60k Add back depreciation (an expense on the P&L that didn’t use any cash this year) +$20k Customers owe more at year end than they did at the start ($15k) Cash spent on a new truck and equipment ($22k) Principal paid on loans ($18k) Owner distributions ($12k) Change in cash for the year +$13k Not one of those four drains is wrong on its own. The truck probably needed replacing, the loans have to get paid, and Dave has to eat. They just don’t show up on the P&L the way owners expect them to, so it’s easy to make decisions off a profit number that isn’t sitting in the bank. The Usual Places Cash Goes 1. Loan payments Only the interest on a loan shows up as an expense on the P&L. The principal, which is usually the bigger part of the payment, comes out of cash without touching profit at all. A business with a couple of truck loans and an equipment note can have several thousand dollars a month leaving that never appears on the P&L. 2. Owner draws and distributions Depending on how your business is set up, what you take home may not show up as an expense on the P&L either. It comes straight out of cash. That’s normal, but it means the profit on the P&L is before you’ve been paid. (How owner pay is set up for taxes is a question for your CPA.) 3. Trucks and equipment When you buy a $60k truck, the P&L doesn’t take the whole $60k as an expense in that month. It spreads the cost out over several years as depreciation. The cash, or the down payment, leaves the day you buy it. 4. Customers who haven’t paid yet Revenue shows up on the P&L when you do the work and send the invoice. The cash shows up when the customer pays. If customers are taking longer to pay, or you did a lot of work late in the year, profit is sitting in receivables instead of the bank. 5. Materials and inventory on the shelf Parts and materials you bought but haven’t used yet are cash that’s been spent, but they won’t show up as a cost until they go into a job. A few pallets of pavers or a shelf full of condensers can easily be tens of thousands of dollars. 6. Paying vendors faster than customers pay you If you pay suppliers in 10 days and customers pay you in 45, you’re funding the gap. Paying vendors closer to their due date, instead of the day the bill shows up, keeps more cash in the account without costing you anything, as long as you still pay on time. 7. Sales tax and payroll taxes you’re holding If you collect sales tax, that money belongs to the state, and payroll taxes withheld from employees belong to them and the government. It sits in your account until it’s due, and if it gets spent on operations, the bill still comes. A Quick Check for Your Own Business Here’s a simple way to see whether the gap is normal or something to dig into: Change in cash for the year ÷ revenue = net cash flow % Then compare it to your net margin (net income ÷ revenue). For Dave, net cash flow is about 1% ($13k on $1.2M) while net margin is 5%. A rule of thumb I use is that net cash flow % should track reasonably close to net margin % over time. If it’s consistently well below, more cash is leaving through loan principal, owner draws, equipment, or slow customers than the P&L shows, and it’s worth finding out which one. It also helps to look at the balance sheet next to the P&L. The P&L shows how the business performed. The balance sheet shows what you own, what you owe, and what customers owe you, which is where most of the missing cash turns up. What to Do About It Each of these has a fix, and most of them come down to planning ahead: knowing how much of your profit is already spoken for by loan payments, putting owner pay on a plan, timing equipment purchases, collecting faster, and keeping tax money separate. Which ones matter most depends on where your gap is, and that’s the part worth working through with someone who can look at your actual numbers. If you’re growing quickly, there’s a second set of reasons cash gets tight, like hiring ahead of the revenue and carrying more receivables. Why Growth Doesn’t Always Mean More Money covers that side. Where to

Should You Buy That Truck Before Year-End? Every December, someone tells a business owner to buy a truck or a piece of equipment before the year ends “for the tax write-off.” Sometimes it’s the dealer, sometimes it’s a buddy at the supply house, and sometimes it’s the CPA. And sometimes it’s good advice. But a tax savings only helps if the purchase made sense in the first place, and that part tends to get skipped when there’s a deadline attached. Here’s how I’d think through a year-end purchase before signing anything. The Write-Off Still Costs Money A deduction lowers your tax bill, but it doesn’t make the truck free (for you Seinfeld fans, this was Kramer’s understanding!). Let’s say you buy a $70k truck in December, and your CPA estimates it’ll lower your tax bill by around $15k. You still spent $70k to save $15k, so the truck needs to be worth the other $55k to the business. If it’s replacing a truck that’s falling apart or adding a crew you already have work for, that’s probably an easy yes. If it’s a nicer version of a truck that was working fine, you’ve spent a lot of cash to pay a little less in taxes. And you need to think about how the new truck payment will be absorbed over the winter which may be a slower time of year. How much a purchase saves in taxes depends on your business, your income this year, the equipment, and the current rules, and that’s your CPA’s call. What we can help with is the other half: whether the business needs it, whether it can afford it, and how it should be paid for. Five Questions Before You Buy 1. Would you buy it in March? This is the simplest test. If the tax deadline weren’t there, would you still buy this truck in the next few months? If the answer is yes, year-end timing might be a bonus. If the answer is no, the tax savings is the only reason, and that’s usually not enough. 2. Will it earn, save, or protect money? A good equipment purchase does at least one of three things: it brings in more revenue, it lowers costs (like repairs on the truck it replaces, or labor hours on a slow job), or it reduces risk (like breakdowns in the busy season). If you can’t point to which one, it’s probably a want more than a need, and that’s fine as long as you know that going in. 3. How fast does it pay for itself? Take what the purchase costs and divide it by how much extra profit it brings in each month, after the tech’s pay, fuel, insurance, and the payment. A rule of thumb I use: if the payback runs past about 18 to 24 months, I’d reconsider, look at leasing, or wait. Here’s how two different December trucks might compare: Truck A: adds a crew with work waiting Truck B: an upgrade for the tax savings Price $70k $70k Extra profit each month About $3.5k after crew pay, fuel, and insurance About $0, it replaces a truck that was working Payback About 20 months It doesn’t pay back on its own Tax savings (your CPA’s estimate) Around $15k either way Around $15k either way Makes sense? Probably, and the timing helps Only if you’d buy it anyway 4. Can the business carry it right now? Before any purchase that adds a payment, I’d check the current ratio: current assets divided by current liabilities. It’s a quick way to see whether the business can cover what’s coming due in the next year. In my talks I use a sample business owned by a guy named Dave, whose current ratio is about 1.11. That means he has a little more cash in the bank than what he owes in short-term debt like credit cards and lines of credit. A healthy range for a service business is around 1.5 to 2.0. If you’re closer to Dave’s number, adding a down payment and another monthly payment right before the slow season is how a good year turns into a tight January. It also helps to look at your cash runway, which is cash in the bank divided by average monthly expenses. If a $7k down payment takes you from four months of runway to under three heading into winter, that’s worth knowing before you sign. 5. Is there a cheaper way to get the same result? A used truck, a lease, renting for the few weeks you really need it, or getting another year out of the current truck with a repair might get you most of the benefit for a lot less cash. Equipment Financing vs. Leasing walks through how to compare those options. If You Do Buy, a Few Things to Ask Where to Start If you want one thing to do this week, ask your CPA for a year-end tax estimate before you go shopping. Then run the five questions above on the truck you’re considering. If it passes on its own, the tax savings is a bonus. If it only makes sense because of the tax savings, that’s your answer too. If you’d like a second set of eyes on a purchase before you commit, a free Cash Clarity Call is an easy place to start, and we can run the numbers with you.

Switching Bookkeepers? Why January 1 Is the Cleanest Time Most owners who want to switch bookkeepers have been thinking about it for a while. The books are always behind, the reports don’t answer the questions you’re asking, or the CPA keeps sending back the same list of problems every spring. It usually takes a bad month to finally make the call, and by then it’s easy to rush it. If you’re anywhere close to that point, the start of a new year is the cleanest time to make the change, and the decision needs to happen in the next month or two for it to go smoothly. Here’s why, and how to do it without losing anything along the way. Signs It’s Time None of those make your current bookkeeper a bad person. Sometimes a business grows past what a part-time setup was built for, and that’s a good problem to have. Why January 1 Works Best The Timeline When What happens October Decide to switch. Interview a few bookkeepers or firms. Ask the questions in How to Find the Right Bookkeeper for a Trades Business. November Pick one and sign on. Make sure you have admin access to your own accounting software. Tell your CPA about the change. December Your old bookkeeper closes November and pulls together the handoff list below. Your new bookkeeper gets access and sets up anything that needs to change for January, like service lines or job costing. January Your new bookkeeper starts recording January transactions. Your old bookkeeper closes December and the year. February The finished year goes to your CPA. Your new bookkeeper closes January on their normal schedule. If you wait until January to decide, you can still switch, but everything above gets squeezed into the busiest weeks of the year for both bookkeepers and your CPA. What to Get From Your Old Bookkeeper Before the handoff, make sure you have: Most bookkeepers are professional about a handoff, especially when you give them time and a clear list. Asking in November instead of January goes a long way. If the Books Are Already a Mess Sometimes the reason for switching is that this year’s books aren’t in good enough shape to hand to a CPA. In that case, the switch usually comes in two parts: a cleanup of this year’s books, done over December through February so the CPA gets something accurate, and monthly bookkeeping starting in January. It’s more work up front, but it’s a lot better than starting the new year on top of a year nobody trusts. If You Can’t Wait for January Switching mid-year is fine too, especially if the current situation is causing real problems. The next cleanest point is the end of a quarter, and after that the end of any month. The same handoff list applies. It just helps to be clear about which months each bookkeeper is responsible for. Common Mistakes Where to Start If you want one thing to do this week, log into your accounting software and check who’s listed as the primary admin. If it isn’t you, fix that first, whether you switch bookkeepers or not. If you’re thinking about a change and want to talk through what that would look like, a free Cash Clarity Call is an easy place to start. We’re happy to help you plan the switch, even if you end up going with someone else.

Your Year-End Checklist Before December 31 The last few weeks of the year are busy for most service businesses, between holiday schedules, year-end jobs, and customers who suddenly want everything done before January. It’s also the last chance to clean up the year’s numbers while there’s still time to do something with them. Once January 1 hits, most of the useful decisions for this year are behind you and the rest is paperwork. Here’s what I’d work through between now and the end of the year, in roughly the order it needs to happen. Most of it takes an hour here and there, and it makes January and tax season a lot easier. The Timeline When What to do October Get the books current through September. Book a planning meeting with your CPA. Start collecting W-9s from subcontractors and vendors. November Close October and November. Clean up old receivables. Review pricing for January. Start next year’s budget. December Meet with your CPA before the year ends. Make any year-end decisions. Count inventory on or near December 31. January Close December. Send your CPA the year-end books and any forms they need. Get year-end loan statements. 1. Get the Books Current Everything else on this list depends on this one. If your books are behind, your CPA can’t plan with you, and any decision you make before year-end is based on a guess. By the end of November, you want: If the books are months behind, this is the time to get help catching up, since trying to rebuild a whole year in February is a lot more painful than doing it now. 2. Meet With Your CPA Before the Year Ends This is the most valuable hour on the list. A planning meeting in October, November, or early December gives your CPA a chance to look at where the year is headed and talk through options while you can still act on them. After December 31, most of those options are gone. Bring a year-to-date P&L and balance sheet, a rough idea of how December will go, and any big purchases or changes you’re considering. The tax decisions themselves belong with your CPA, and the meeting is only as useful as the numbers you bring to it. 3. Clean Up Receivables Pull your A/R aging report and go through anything over 60 days. Some of it can be collected with a phone call, some needs a payment plan, and some probably isn’t coming back. Let’s say you have $40k in receivables older than 60 days. If you can collect even half of it before December 31, that’s $20k in the bank heading into January, which is a slow month for a lot of trades. For anything you don’t expect to collect, write it off against bad debt (talk to your bookkeeper or CPA). 4. Collect W-9s From Subcontractors and Vendors If you pay subcontractors or other businesses, you’ll likely need their tax information to file year-end forms in January. The easiest time to get a W-9 is before you’ve paid someone their last check of the year, and the hardest time is in late January when you need it and they’ve stopped answering. Make a list of everyone you paid this year, check who you’re missing a W-9 for, and send the requests now. Your CPA or bookkeeper can tell you which vendors need forms and what the current filing rules and deadlines are. 5. Count Your Inventory If you carry parts, materials, or equipment for resale, count what’s on the shelf on or near December 31 and compare it to what the books say you have. Shrinkage, parts that walked off in trucks, and materials that were used but never recorded all show up here. It’s not anyone’s favorite day of the year, but it’s the only way to know your cost of goods and your margin for the year are right. 6. Pull Together Your Equipment List Write down every truck, trailer, and piece of equipment you bought or sold this year, with the date and the price, and whether it was paid in cash or financed (ideally you do this during the year as it happens!). Your CPA and bookkeeper will want this, and it’s much easier to pull together now than to reconstruct from bank statements later. 7. Look at Owner Pay for the Year Add up what you’ve taken out of the business this year in salary, draws, and distributions, and compare it to what the business earned. If you’ve taken out more than the business made, it’s better to know that now than to find out when the cash runs short in February. How owner pay should be set up for taxes is a conversation for your CPA meeting. 8. Review Pricing for January If wages, fuel, insurance, or materials went up this year and your prices didn’t, January is a natural time to adjust. Customers are more used to seeing price changes at the start of a year, and it gives you a clean before-and-after in the books. Run your numbers on labor cost and margin by service line before deciding how much. 9. Start Next Year’s Budget Even a simple budget helps: expected revenue by month, what you’ll pay your crews, known increases in rent, insurance, and software, and any hires or trucks you’re planning. It gives you something to measure January against, and it shows the slow months ahead of time so you can plan for them. 10. Get Year-End Statements in January Once the year closes, gather the December statements for every bank account, credit card, and loan, plus payroll’s year-end reports. Your bookkeeper will need them to close December, and your CPA will need them for the return. Where to Start If you want one thing to do this week, email your CPA and ask for a planning meeting before the end of the year, then check that your books are current through September. Those two things make

How to Find a CPA Who Understands Your Business We’re not a CPA firm, but we work alongside our clients’ CPAs every week, so we see the full range. Some CPAs call the owner in October to talk through the year before it’s over. Others show up once a year in March with a return and a number, and the owner finds out what they owe at the same time they find out why. Both might file a correct return. The difference is whether anyone helped you plan before the year was over, and for a service business with trucks, equipment, payroll, and uneven cash, that planning is where a lot of the value is. Here’s how I’d find a CPA who’s the first kind, and how to tell if the one you have already is. First, Know What You Need From a CPA A CPA is licensed by the state, and they’re the one who can prepare and sign your business and personal returns, represent you with the IRS if something comes up, and give you tax advice. What they usually don’t do is record your day-to-day transactions (that’s your bookkeeper) or help decide what to charge and when to hire (that’s where a CFO comes in). If the titles are fuzzy, Bookkeeper vs. Accountant vs. CPA vs. CFO: Who Does What? lays them out side by side. The main question to settle is whether you want someone who mostly prepares returns, or someone who also plans with you during the year. Once a business has employees, equipment, and a few hundred thousand dollars of profit, most owners are better served by a CPA who does both. Where to Look Before you meet anyone, look them up with your state’s board of accountancy to confirm the license is active. Questions to Ask Red Flags How to Tell If You Have a Good One A good CPA relationship feels pretty boring, which is the goal. The tax bill is close to what you were told to expect. You meet at least once before the year ends. They know your numbers before the meeting starts. They explain things in a way you could repeat to your spouse or business partner. And when your bookkeeper sends over the year-end books, the questions that come back are small ones. If most of that sounds like your current CPA, keep them. If very little of it does, it’s worth having a conversation with them about what you need before you go shopping, since sometimes the fix is as simple as asking for a planning meeting. How the CPA Fits With Everyone Else For most service businesses we work with, the setup that runs smoothest looks like this: the bookkeeper closes the books every month, the CFO uses those numbers to forecast and help make decisions, and the CPA uses the same clean books to plan and file the taxes. When all three are looking at the same numbers, the owner isn’t stuck being the go-between, and nobody’s surprised in April. Where to Start If you want one thing to do this week, email your CPA and ask for a planning meeting before the end of the year. October and early November are the best time, since there’s still room to make decisions before December 31. How they respond to that email will tell you a lot. If you’d like help getting your books ready for that meeting, or you’re not sure what to ask, a free Cash Clarity Call is an easy place to start. We’re always glad to work alongside the CPA you already have.

How to Find the Right Bookkeeper for a Trades Business: Questions to Ask There’s no license required to call yourself a bookkeeper, which means the person keeping your books could be excellent or could be learning QuickBooks on your dime. Most owners find out which one they hired about a year in, usually when the CPA calls with questions nobody can answer. Whether you end up working with us or someone else, these are the questions I’d ask before handing anyone your books, plus how to tell a few months into the relationship whether you picked well. A lot of the lists of bookkeeping questions out there are written for any business. These are for businesses that run crews, trucks, and jobs. First, Know What You’re Hiring For Bookkeeping help usually falls into one of two jobs, and it’s worth knowing which one you need before you start interviewing: Plenty of businesses need both, cleanup first and then monthly. It also helps to decide whether you want someone in-house, a freelancer, or a firm. An in-house person knows your business day to day, and a firm usually has backup when someone is out sick or leaves. The Questions to Ask Do they understand how a trades business works? How will the work get done each month? Systems and people Pricing Red Flags How to Tell If You Have a Good One A few months in, these three checks take about five minutes and tell you a lot: Check What good looks like Compare the cash balance on your balance sheet to your bank statement for the same month-end date. They match. If they don’t, the bank reconciliation isn’t getting done. Compare your loan balances on the balance sheet to your latest lender statements. They’re close. Loans are one of the most common places books drift, since only the interest shows up on the P&L. Look for “Uncategorized,” “Ask My Accountant,” or “Suspense” on your reports. They’re at or near zero. Beyond those, a good bookkeeper closes on time, sends the reports without you asking, flags things before you notice them (“fuel costs jumped this month, did something change?”), and makes year-end easy for your CPA. If your CPA’s first comment is how clean the books were, you picked well. If You Need to Switch There’s a myth that the only good time to switch bookkeepers is at the beginning of a new year. While that timing has some advantages, the benefits of switching to a good bookkeeper today far outweigh the benefits of staying with a mediocre one until the end of the year. Waiting means more months of bad data to run your business on, and more to clean up before you can file taxes. Before you make the change, make sure you have admin access to your own QuickBooks or Xero file, copies of the last few months of reconciliations, and a list of any open items the old bookkeeper was working on. If the books are already in bad shape, plan on a cleanup before the monthly work starts. Where to Start If you want one thing to do this week, run the three checks in the table above on last month’s books. Whether you’re hiring someone new or checking the person you already have, it’ll tell you where things stand. If you’d like help figuring out what your business needs from a bookkeeper, a free 15-minute discovery call is an easy place to start, and we’re happy to help even if you end up hiring someone else.

Bookkeeper vs. Accountant vs. CPA vs. CFO: Who Does What? A lot of owners have one person doing all of it. Maybe it’s a bookkeeper who also answers pricing questions, or a CPA who gets asked whether it’s a good time to hire, or a spouse who handles “the money stuff” on Sunday nights. That can work for a while, but eventually someone ends up answering questions they were never set up to answer, and the owner doesn’t find out until something goes sideways. The titles don’t help, since people use them loosely. Here’s what each one does, what they don’t do, and when a service business usually needs them. The Short Version Role What they do What they usually don’t do License? Bookkeeper Records transactions, reconciles bank and credit card accounts, and closes the books each month. Sometimes handles invoicing, bills, and payroll. Give tax advice, prepare tax returns, help decide pricing and hiring, forecast, or help manage cash flow. None required Accountant Broader than bookkeeping: adjusting entries, financial statements, and sometimes tax preparation. The title covers a wide range of experience. Depends on the person. An accountant without a CPA license can’t represent you with the IRS the way a CPA can. Not for the title itself CPA Prepares and signs tax returns, does tax planning, represents you with the IRS, and can provide reviewed or audited financial statements if a lender requires them. Record your daily transactions, or plan cash, pricing, and hiring month to month. Yes, licensed by the state Controller Manages the accounting function for a larger business: the close, internal controls, and the people doing the bookkeeping. Usually more focused on compliance and risk than on strategy. Not required Fractional CFO Uses the numbers to look ahead: forecasting, cash planning, pricing, margins by service line, and big decisions like hiring, buying equipment, or adding a location. Do the daily bookkeeping or prepare your taxes. Not required A simple way to keep them straight: the bookkeeper records what happened, the CPA makes sure the business is square with the government, and the CFO helps decide what to do next. Which Ones Do You Need? It depends more on how complicated the business is than on revenue alone, but for the service businesses we work with, it usually looks something like this: Stage Usually enough Worth adding when… Starting out, one truck or one crew A bookkeeper (even a few hours a month) and a CPA for taxes You’re spending more than a few hours a week on your own books. Growing, a few crews, under about $1M Monthly bookkeeping, a CPA who plans with you during the year, and basic fractional CFO services You start wondering whether you can afford the next hire or truck. $1M and up, several crews or service lines Monthly bookkeeping, a planning CPA, and a more robust fractional CFO relationship Growth, a second location, multiple debt channels, or margins you can’t explain. Larger, with an office team Dedicated bookkeeper, often a controller, a CPA firm, and a CFO (deeper fractional relationship or full-time) The accounting team needs someone managing it day to day, or there’s a potential acquisition or exit strategy. Common Mix-Ups How They Work Together When all of the roles are filled, the month usually runs like this. The bookkeeper closes the books by around the 10th of the following month. The CFO reviews those numbers against the budget and forecast, updates the outlook, and meets with the owner about what to act on. The CPA uses the same clean books to plan taxes during the year and file after it ends. Since everyone’s looking at the same numbers, the owner gets fewer surprises and doesn’t have to be the go-between. At Cash Flow Copilot, we handle the bookkeeping and CFO side and work alongside your CPA for taxes. Plenty of our clients keep the CPA they’ve had for years, and we’re glad they do. Not Sure Who to Call? When a question comes up, this usually sorts it out: Where to Start If you want one thing to do this week, write down who currently handles each of those three questions in your business. If the answer to any of them is “me, at night” or “nobody,” that’s the gap to fill first. If you’d like help figuring out which one your business needs right now, a free 15-minute discovery call is an easy place to start, and we’ll give you a straight answer even if it’s a bookkeeper or a CPA and not us.

Do I Need a Fractional CFO? Signs You Do, and Signs You Don’t Yet If you search this question, most of what comes up is written for tech startups getting ready to raise money from investors. That’s a real use for a CFO, but it’s not the situation most of the owners we work with are in. If you run an HVAC company, a landscaping crew, or a pest control route, the question sounds more like this: am I making the right calls with the money I already have, and is anyone looking far enough ahead to warn me when something’s coming? I want to walk through when a fractional CFO makes sense for a service business, and just as important, when it doesn’t yet. If you’re not there, I’d rather you know that and spend the money on the thing that will help. What a Fractional CFO Does, in Plain Terms Your bookkeeper records what happened. Your CPA makes sure the taxes are right. A fractional CFO takes those numbers and helps you decide what to do next: what to charge, when you can afford the next truck or hire, how much cash to carry into the slow season, and which part of the business is making money. “Fractional” means you get that part-time, usually a set amount of time each month, instead of paying for a full-time executive you don’t need. (If the titles are a blur, Bookkeeper vs. Accountant vs. CPA vs. CFO: Who Does What? breaks it down.) Signs You Probably Do Need One Signs You Don’t Need One Yet This is the part most CFO firms leave out, and it matters just as much. A Quick Self-Check Here are five questions I’d want any owner past $1M of revenue to be able to answer without digging: Question Why it matters What was our gross margin last month, by service line? Shows which work is carrying the business and which needs a pricing fix. How many months could we cover our bills with the cash we have today? Tells you how much room you have to make a mistake or get through a slow stretch. How much do we need to bring in each month just to break even? Tells you whether a busy month is actually a profitable one. How long do customers take to pay us, on average? Every extra day is cash sitting in someone else’s account. What happens to cash over the next 90 days if sales drop 20%? Shows whether the business can take a hit, and what you’d cut first. If you can answer all five, you’re in better shape than most. If two or more get a shrug, that’s usually a sign it’s time to talk to someone. How to Tell If It Would Pay for Itself A fractional CFO should earn more than they cost, and it’s fair to ask how. Let’s say a business does about $1M a year and gross margin moves from 28% to 38% after a pricing review and some changes to how the crews are scheduled. That’s roughly $8k a month in extra cash with no other changes and no extra jobs. On a $2M business, even a 3-point improvement in margin is around $60k a year. The other financial factors are buying your time back (which is the highest rate in the company) and avoiding poor decisions, which are often more costly than missing out on good ones. The other half of the value is harder to put a number on, but often just as valuable: fewer surprises, faster decisions, more confident leadership, and not having to carry every financial question around by yourself. Owners tell us that part matters more than they expected. If You’re Not Ready Yet If you read the “not yet” list and saw yourself, here’s what I’d do to get ready: By the time you’ve done that, you’ll know pretty quickly whether you need more help, and whoever you bring in will be able to start on the useful work right away. Where to Start If you want one thing to do this week, try answering the five self-check questions using last month’s numbers. It takes about 20 minutes, and it’ll tell you more about whether you need a CFO than any article will. If you’d like a second opinion on where you land, a free 15-minute discovery call is an easy place to start. Even if the answer is “not yet,” we’ll tell you that and point you toward what would help first.

Combining books may create confusion in financial clarity. Understanding key insights can help individuals navigate potential pitfalls effectively.