As a mechanic, you have the knowledge and skills to keep your customers’ cars running smoothly. However, running a successful mechanic business involves more than just fixing cars.
You also need to keep track of your finances, including preparing invoices, meeting tax obligations, and managing cash flow.
There are several options available to mechanics for managing their finances, including:
- Doing it yourself: If you’re just starting out or have a small sales volume, you may be able to manage your finances on your own.
- Hiring an in-house accountant: This is a good option if you have a larger business and can afford to have a full-time accountant on staff. However, this can be expensive, and you may not need a full-time accountant.
- Using an accounting agency: This is often the best option for mechanics as it provides access to professional expertise without the high costs of hiring an in-house accountant.
This article will tell you about the different options available to mechanicsand the associated costs.
What is accounting for mechanics?
The process of accounting involves the systematic recording and summarization of financial information, with the aim of ensuring that a company maintains a healthy financial position and adheres to accounting regulations.
This entails the meticulous tracking of expenses, the preparation of tax returns, and the verification of financial statements for accuracy.
While small business owners may possess fundamental bookkeeping and accounting skills, they often lack the expertise in financial concepts and practices necessary to make informed decisions.
Consequently, it can be challenging for them to determine how best to allocate resources and manage their finances effectively.
To achieve financial stability and success, it is essential for small business owners to seek the guidance of professional accountants and financial advisors.
How to do accounting for mechanics in 7 steps
We’ll walk you through each step to understand the basic accounting procedures to manage your finance properly.
Find the most suitable accounting software
As a business owner, keeping track of your finances can be a daunting task. However, with the right tools in hand, managing your business finances can be made much easier.
An accounting software is one such tool that can help you keep track of all financial transactions, process invoices and bills, create a chart of your business finances, and generate financial statements.
According to various studies, businesses that make use of accounting software tend to be more profitable and have better cash flow management.
The benefits of using an accounting software are not limited to financial gains alone. It also helps in reducing the time spent on accounting tasks by a significant 34%.
In order to help mechanics choose the best accounting software for their business needs, we have conducted thorough research and found some useful options that can streamline their accounting tasks.
Record entries in your software
When you acquire accounting software, it becomes crucial to meticulously document every business transaction and revenue earned. The software automatically computes your profits and generates financial statements based on your entries.
To streamline your record-keeping process and avoid duplicating efforts, it’s essential to note recurring expenses like rent and salaries. Creating individual invoices for each client will enable you to track the revenue generated accurately.
The accounting software provides an overview of your financial standing through a comprehensive chart that displays pertinent information about your income and expenses.
It is advisable to record every transaction as soon as it occurs to maintain accurate records and prevent errors.
Record Cost Of Goods Sold (COGS)
COGS is an acronym that represents the “cost of goods sold.” It is a crucial metric used to determine the total cost incurred by a company for selling its inventory, comprising the original cost of the products and any additional expenses such as handling and shipping.
It is significant to comprehend this metric since it provides an accurate insight into a company’s financial performance by considering the actual expenses incurred in the sales process.
This includes the total cost of the items during their purchase and any supplementary expenditures made since then.
By integrating products and services into the accounting system, your COGS can be calculated based on the invoices generated. This approach provides a comprehensive understanding of the total expenses incurred during the sales process.
Make a chart of accounts for proper bookkeeping
Developing a comprehensive chart of accounts is crucial for mechanics to keep track of their financial transactions. This financial document showcases the mechanic’s expenditures, including salaries, rent, and other expenses, as well as their earnings.
In a mechanic business, the chart of accounts would encompass various accounts, such as revenue generated from sales, production costs, expenses associated with salaries and rent, equipment and machinery, and the mechanic’s net profit.
When a business sells its products or services and incurs costs associated with purchasing supplies and paying employees, these are considered the costs of doing business. After deducting the costs, the business may either have a surplus (referred to as profits) or may require external financial assistance to cover the expenses.
The business might need to distribute some of the profits to shareholders (referred to as equity) or retain them for future use (referred to as retained earnings).
Automate the accounting process to save time
By automating time-consuming tasks such as reconciling accounts, paying salaries, and issuing invoices, accounting process automation can help businesses save valuable time.
Utilizing automation tools, such as invoice processing software, can drastically reduce the amount of time spent processing invoices manually. This software can save businesses up to 50% of the time it would take to process invoices manually each week.
The implementation of automation technology in accounting processes not only increases efficiency but also reduces the likelihood of errors occurring.
This, in turn, can improve the accuracy of financial reporting and increase the overall productivity of a business.
Moreover, the time and effort saved from automation can be redirected toward other important business tasks, such as strategy development and customer engagement.
Hire an accountant
They can help you set up automated processes that will automatically take care of your business finances. An accountant can help you keep track of your finances, so you don’t have to pay any fines or penalties.
An accountant can help you keep your business finances accurate and organized. It’s a good idea to hire one if you don’t have time to do the work yourself.
Best accounting agencies for mechanics
Here are some good accounting firms you might want to consider.
1-800 Accounting Agency
1-800Accountant is an accounting agency based in New York. 1-800Accountant specializes in working with small businesses. It offers services starting from $0 to $375/month, which is quite affordable.
Accotax Accounting Agency
Accotax is an accounting agency based in London that works internationally with small businesses, partnerships, and other business types. Accotax’s pricing is perfect for startups and self-employed as it ranges from $265 to $600/month on average.
It has a 4.9-star rating on Google My Business, a 4.7-star rating on Facebook, and a 4.9-star rating on Trust Index.
Best 5 Accounting Tips For bakery Businesses
1-Use accrual-based accounting to record transactions
2-Understand basic tax requirements
3-Keep your business bills
4-Reconcile your transactions
5-Create a business bank account
Use accrual-based accounting to record transactions
Accrual-based accounting means accounting for a business in a way that recognizes revenue and expenses when they actually happen, rather than when money is actually exchanged. This way, businesses can better track their financial performance over time.
Accounting that uses accrual-based principles helps businesses understand how much money they have earned, and how much they have spent, over time. This helps businesses plan in a more realistic way, knowing that they will likely have to pay for things like expenses sooner than they might have thought.
The auditing process ensures that a company’s financial reports are accurate and follow Generally Accepted Accounting Principles (GAAP). This helps ensure that the company’s operations are consistent with other businesses in the same industry.
Understand basic tax requirements
Once you have determined which forms need to be filed, be sure to consider any deductions or credits that could reduce the amount of taxes owed. Businesses use forms such as the 1120S and 990T to report their income and expenses.
There are many types of deductions that people can take on their taxes, such as mortgage interest payments, charitable donations, and medical expenses.
One type of deduction people often use is credits, which are like subsidies given to people in order to encourage them to spend money in certain areas. Some common credits people may use are child care costs, earned income credit, and student loan interest deductions.
Be sure to report all your income accurately, including wages from employers, self-employment earnings, dividends from investments, and any capital gains or losses from stocks or mutual funds.
It is important to remember all sources of taxable income when preparing your tax return, as underpayment penalties may be incurred if you are later audited by the IRS.
Each state has its own tax laws and filing deadlines, so be sure to consult those before April 17. Additionally, pay attention to any special tax rules that apply to your state.
Keep your business bills
Managing your bills can be a difficult task, but having a system in place will help you keep your business running smoothly.
One way to manage your finances is to set up an online payment system that allows you to pay bills quickly and easily. Melio is an excellent example of such a system.
These will help make sure payments are made on time, which can help avoid late fees or interest charges.
Your reminders can help you avoid missing payments, and automating your payments can save you time and money in the long run.
Reconcile your transactions
Reconciling helps you make sure that all the financial records in your accounting system are accurate and up-to-date. It also allows you to identify any discrepancies or errors, so someone can quickly rectify them before they become a problem down the line.
To reconcile a debt, you need to gather all relevant documents, including bank statements, invoices, and receipts. This will help minimize any discrepancies between what you owe and what you’ve actually spent on items.
The next step is to enter each transaction into the online banking feature, which will then download the transactions from the bank account. Next, the transactions should be verified against the associated paper trail documentation, such as invoices and receipts.
If something is not correct, there may be a discrepancy that needs to be investigated further.
Create a business bank account
As a business owner, setting up a business bank account is essential for managing your finances. Having an organized and separate bank account helps you keep track of income and expenses as well as ensure that you are properly paying taxes.
The company’s insurance policy protects it from financial liability if something goes wrong. Before starting a business bank account, it is important to consider the steps involved.
To start a business, you need to decide what type of entity your business will be: a sole proprietorship, partnership, or corporation. Once you know this, you need to research different banks to find the best one for your needs.
You’ll need to gather all the necessary documentation, such as articles of incorporation or DBA forms and proof of identity. Finally, you’ll need to make an initial deposit into the new accounts, so they can be activated immediately.
A dedicated banking solution for small businesses can be set up relatively quickly and does not require complex procedures. This will help ensure that all funds related to the business are tracked efficiently and avoid any potential legal issues down the line.
Accounting for mechanics FAQ
How often should I review my books and financial records, so they stay accurate and up-to-date?
It’s always recommended that you review your financial records to stay accurate and up-to-date. Monthly reviews include financial statements, balance sheets, cash flow statements, and any other documents related to finances.
If there are large fluctuations in revenue from one month to the next (such as seasonality), it might be helpful to have weekly reviews in order to track changes over time more accurately. This way, you’ll know exactly what taxes you need to pay as part of running your bakery business.
What taxes do I need to pay as part of running my mechanic business?
As a mechanic business owner, you will need to pay taxes such as sales tax, employer payroll tax, and more. It’s always a good idea to consult with an accountant who will be able to understand specific requirements depending on your state’s laws.
Regular bookkeeping monitoring helps businesses stay compliant with regulations and maintain track of their overall success metrics.