Bookkeeping for Electricians: Materials, Permits and Change Orders

What electrical books need to track

An electrical job is not one line in your books. It is a mix of materials, labor and permits, all spent on one job before you get paid for it.

Your books need to track all of that by job. When you do, you can see which jobs paid and which ones cost more than they brought in. When you do not, you get one big pile of wire and one big pile of labor, and no way to tell which job was the good one.

A job uses wire, conduit, breakers, panels and devices. Most jobs use a crew for the labor. Many jobs pull a permit before the work starts. Some jobs also get a change order when the owner adds work or changes the scope. Each piece needs its own line on the job.

Here is what a clean job looks like.

When each line ties to the job, your profit per job is real. When the lines sit in one account, you can not tell which job made money.

How materials show up in your books

Materials are the biggest cost on most electrical jobs. The supply house sells you wire, conduit, breakers, panels and devices. You get a bill for each pick up or delivery. That bill is a job cost.

The clean way is to book each material bill to the job it was bought for. The wire goes to job one. The breaker goes to job one. The panel goes to job one. When the job is done, you can see what it cost to wire it.

The messy way is to book the whole supply house bill to one materials account. Now job one looks cheap, job two looks cheap, and the real cost sits where no one can find it. You can not bid the next job right because you do not know what the last one cost.

Here is a simple way to keep materials straight.

• **Match each supply house bill to the job: ** the bill shows the delivery address or the job name.
• - **Split the parts out by type: ** wire, conduit and breakers are separate costs, not one lump.
• - **Tag each line with the job number: ** so the total for the job is real at month end.
• - **Reconcile the supply house statement to the bank: ** what you paid should match what cleared.
• - **Add up the materials cost per job at month end: ** that total feeds your profit per job.

When materials sit by job, your profit per job is real. When they sit in one pile, you are guessing.

How permits and fees fit in your books

Most electrical jobs need a permit. The city or county charges a fee to pull the permit and to inspect the work. That fee is a job cost, just like the wire and the labor.

The clean way is to book each permit fee to the job it was pulled for. The permit for job one goes to job one. The inspection fee for job one goes to job one. When the job is done, the permit cost is part of the job cost.

The messy way is to book every permit to one fees account. Now the job that needed three permits looks just like the job that needed one. The hard job with the big permit costs looks cheap, and the easy job looks expensive. The real story is lost.

Here is what to keep straight.

• **Book the permit fee to the job: ** not to one general fees account.
• - **Book the inspection fee to the job: ** it is part of the same job cost.
• - **Save the permit paper: ** it shows the job address and the fee.
• - **Note the inspection date: ** so you know when the work was signed off.

A permit is not a surprise. It is a cost you can plan for. When it sits by job, your bid on the next one is built on the real cost of the last one.

How change orders change your books

A change order is a change to the job after it starts. The owner adds a few outlets. The plan changes and you run more conduit. The work costs more, and you bill more for it.

The clean way is to book the change order to the job it belongs to. The added materials go to job one. The added labor goes to job one. The added billing goes to job one too. When the job is done, the change order is part of the job, and the profit is real.

The messy way is to bill the change order to one account and leave the job as it was. Now the job looks cheap and the change order looks like free money. The next bid is built on a job that did not really cost what the books say.

Here is how to keep it clean.

A change order is a small job inside the big one. When it lands on the right job, the big job tells the truth.

How to keep job costs and overhead apart

Job costs are the costs you spent on the job. Materials, crew pay, permits and change orders are job costs. Overhead is the cost of running the business. Truck payments, the shop rent and the office phone are overhead.

The two should stay apart. When you mix them, the job cost looks too high or too low. Your bid on the next job is built on the wrong number. You charge too little or too much, and you can not tell which.

Here is the rule.

• **Job costs go to the job: ** materials, crew pay, permits and change orders.
• - **Overhead goes to the business: ** rent, trucks, tools that serve every job.
• - **A cost that serves two jobs is split: ** not dumped on one job.
• - **A cost that serves no job is overhead: ** not forced onto a job to make it look full.

How the month end close works

At month end, every job needs its costs added up. The materials, the crew pay, the permits and the change orders all pull together into one job total. The income for the job sits next to it. The difference is the profit for the job.

We start with the bank. We match each supply house bill to the bank payment. We match each crew pay run to the bank. We tie each line to the job. Then we add up the job. We send you the profit and loss report and a balance sheet. The job totals sit inside the report.

Here is a simple month end check.

• **Match the supply house statement to the bank: ** every bill cleared.
• - **Confirm each line ties to a job: ** no orphan costs sitting in one materials account.
• - **Add up the job total: ** materials plus crew plus permits plus change orders.
• - **Compare the job total to the income: ** the gap is the profit per job.

A situation we clean up

The materials booked to one account and the jobs with no profit

An electrical contractor runs four jobs in a month. Every supply house bill lands in one materials account. Every crew pay run lands in one labor account. The permit fees land in one more. At the end of the month, the books show one big pile of costs and four jobs with no clear profit. The owner can not tell which job was the good one.

Here is how we handle it. We pull the supply house bills for the month. We tie each one to the job it was bought for. We look at the crew time and split each day across the jobs. We move the permit fees to the job each one was pulled for. We book each change order to the job it belongs to. When we are done, the owner can see the cost per job and the true profit for the month. The profit per job is real for the first time. We set up a simple rule so the next bill, the next crew day and the next permit land on the right job from the start.

How we do it

We do monthly bookkeeping and payroll. We work in QuickBooks Online and Xero, and we are QuickBooks Online Accountants, called QBOA. Each client gets one dedicated bookkeeper who learns your business.

We categorize and reconcile in the first week. We send you one list of questions on day 8. We close your books by day 10 and send a profit and loss statement, a balance sheet, and a cash summary. We use read only access, and we never ask for your bank password.

We serve small businesses in Rancho Cucamonga, Ontario, Fontana, San Bernardino, and across the Inland Empire and the country. There is no long contract. It is month to month, with 30 days notice to stop. You can read more about how we work on our bookkeeping service page.

Mistakes we fix

• Supply house bills booked to one materials account with no job tag
• Permit fees booked to one fees account with no job tied to them
• Change order billing left out of the job it belongs to
• Overhead forced onto a job so the job cost looks too high
• Crew pay booked to one labor account with no job split
• No reconciliation between the supply house statement and the bank

What we do

We do two things: monthly bookkeeping and payroll. For bookkeeping, we categorize and reconcile in the first week, send one list of questions on day 8, and close the books by day 10. You get a profit and loss report, a balance sheet, and a cash summary. We start with a free 20 minute call and reply with a fixed quote in one business day.

Common questions

Do I need to book a permit fee to the job? Yes. A permit is a job cost, just like the wire and the labor. When you book it to the job, the job total tells the truth and your next bid is built on the real cost.

How do I book a change order? Book the added materials, the added labor and the added billing to the job it belongs to. A change order is a small job inside the big one, so it lands on the same job.

Do materials go to one account or to the job? To the job. The supply house bill shows the delivery address or the job name. Tag each line with the job number so the total for the job is real at month end.

Do you do payroll for my crew? Yes. Payroll is one of our two services, along with monthly bookkeeping.