10 Useful HVAC Accounting Tips for all HVAC Professionals

Tip #1: Keep Your Books Up to Date

With many business transactions occurring in the field, falling behind on bookkeeping can happen quickly, which leads to a stressful scramble when tax season rolls around. But without accurate and up-to-date accounting, HVAC business owners lack visibility into cash flow and overall financial performance. This makes tracking business KPIs and measuring success nearly impossible. 

Keeping your books current helps keep a pulse on the business, and allows you to adjust course when needed. ServiceTitan’s HVAC software includes functionality for accepting payments and managing payroll to simplify accounting procedures so business owners can focus on running their companies. With ServiceTitan Payments, techs can snap a photo to securely capture checks and credit cards in the field, or send customers a link to a personalized online payment portal.

And ServiceTitan field service software integrates directly with popular accounting software solutions like Sage Intacct and QuickBooks, so transactions are captured in real time. The QuickBooks integration also helps eliminate user error from inputting accounting data by hand, ensuring accurate, current, and easy-to-access financials—and a less stressful tax season. 

Tip #2: Keep Business and Personal Finances Separate

Keep personal and business finances separate from each other to avoid messy accounting errors and unclear business financials. HVAC business owners should open entirely separate bank accounts for their companies. Personal and business credit cards should be kept separate and only used for their defined purposes. 

In addition to using separate accounts for personal and business expenses, some company owners may choose to even use separate banks to avoid accidentally mixing up personal and business checkbooks or banking cards. 

By keeping business and personal finances separate, HVAC companies benefit from a more accurate report of business expenses. This helps business owners with setting labor rates, job costing, and measuring their company’s profitability. 

Tip #3: Go Through Your Financial Statements Regularly

Even if you’re not a numbers person, reviewing (and understanding) financial reports, such as a balance sheet, income statement, and cash flow statement, prove critical to making sound financial decisions for your business. For example, reviewing a profit and loss (P&L) statement provides a snapshot of profitability. By reviewing it regularly, you can compare it to previous months and learn to identify trends and seasonal patterns in your business. 

While your P&L statement shows whether your business is making a profit, the cash flow statement gives a closer look at the company’s more immediate financials. You can be earning a profit but have a negative cash flow at the same time, so it’s important to examine both financial statements together. 

Lastly, the balance sheet shows assets, investments, equity, and debt/liabilities all on one statement. Your HVAC company must earn enough capital to cover short-term liabilities. By monitoring financial statements on a monthly basis, HVAC business owners track performance and can spot potential financial issues and make a plan to remedy them before they happen.  

Tip #4: Monitor Your Cash Flow

Similar to the importance of monitoring your cash flow statement listed in the tip above, it’s also a good business practice to create a cash flow projection to ensure your business sustains sufficient cash on hand. A cash flow projection takes into account what money is expected to enter and exit your business, and how much cash will be left over after those transactions occur. 

To create a cash flow projection, include estimated accounts receivable, future inventory costs, overhead expenses, and payroll. Update any numbers as needed, such as when inventory costs rise. 

Monitoring cash flow into and out of your HVAC business helps you make smarter decisions, plan ahead for busy or slow seasons, and avoid cash flow problems–all entrepreneurs need to understand when it’s time to spend, save, or invest in their businesses. And cash flow proves key to making those critical financial decisions.

ServiceTitan’s business management software offers a cash flow projection template to track profits on every phase of the job by comparing cost to revenue. It also highlights margins in dollars and percentages for better cash flow planning.

Tip #5: Build an Emergency Fund

Operating a business payroll cycle to payroll cycle keeps it afloat, but prevents a company from growing and keeps it one catastrophe away from closing. Just as it’s wise to build an emergency fund for unforeseen personal expenses, like car repairs or sudden loss of income, your HVAC business needs an emergency fund. (And yes, they should be separate funds. Refer back to tip 2.) Like HVAC business insurance, you want it to be there when you need it.

Whether for internal factors, like a broken piece of equipment or business van repairs, or external factors, like a weather event or social unrest, a corporate emergency fund gives business owners a cushion during tough financial times. It’s recommended for business owners to save three to six months worth of operational expenses. Don’t fret if you can’t sock away all the money right away. Make monthly payments into an emergency fund until you reach your goal savings amount.

Having an emergency fund gives businesses a competitive advantage, as they’re better able to maintain stable business operations through major setbacks, whether those setbacks affect just their company or the industry at large. 

Tip #6: Track Your Equipment and Assets

Track large purchases and your company’s assets, such as work vans or new equipment, and their depreciation for future audits and tax liability purposes. It’s important to track the purchases, but not expense them immediately, as the latter would cause your expenses to be inflated. 

Tip #7: Price Your Margin (Carefully!)

For an HVAC business to succeed, it’s critical to protect your profit margins, ensure accurate costs for materials and equipment, and adjust services and pricing as the market changes. Margins must include your expenses, as well as your goal profit. 

ServiceTitan’s job costing software provides a breakdown of job costs based on materials, equipment, PO, commissions and labor burden so you can see your profit on every type of job. Expenses that are factored into the calculation of margin include the costs of labor, performance-based pay, equipment, materials, and taxes.

And maintaining a pricebook helps ensure HVAC services are priced appropriately and competitively. Manually updating a pricebook pays off, but is labor-intensive and time-consuming. For HVAC contractors looking to save time and protect their margins, ServiceTitan’s Pricebook Pro automatically provides updates to pricing, marketing descriptions, and images any time an integrated supplier makes changes. It also sends adjustments to sold hours and empowers technicians by serving automatic notifications to add upgrades or recommendations that sell well for specific services.

Tip #8: Invest in the Right HVAC Software

Leveraging the right HVAC software helps contractors simplify their bookkeeping and accounting processes. ServiceTitan's comprehensive HVAC software works seamlessly with QuickBooks, and empowers contractors to sync daily transactions in real-time, leverage granular control over their finances, and eliminate hours of tedious bookkeeping work.

From the field, techs can easily generate invoices or purchase orders and export them directly to QuickBooks. Eliminating the need to input accounting data by hand or enter it twice ensures financials are accurate, up-to-date, and accessible in the cloud. 

With ServiceTitan Payroll, your HVAC technicians’ drive time, vendor runs, and time spent on the job are automatically documented on their timesheets. Office staff, including dispatchers and CSRs, clock in and out right in the platform—and OT can be configured with a few clicks. With time accurately accounted for, HVAC business owners gain insight into job profitability with interactive, real-time reporting.

Other relevant ServiceTitan HVAC software features that help business owners protect their bottom line include:

• Quoting: Quickly generate and customize time-sensitive quotes that are both compelling to customers and protect your margins.

• Bidding: Use existing job costing data to generate accurate, compelling bids that are easy to understand and take margins into account.

• Financing: Choose which financing plans make sense for your bottom line and offer customers a safe and easy way to apply for and receive financing in just seconds.

Tip #9: Take Advantage of Any Tax Deductions

Reduce your tax burden by accurately tracking deductions throughout the year, such as office supplies, travel expenses, and equipment purchases. Work with a knowledgeable accountant who can help ensure you take advantage of all deductions and credits available to you. 

Tip #10: Consider Hiring a Professional Bookkeeper 

Accounting only gets more complicated as your company grows, adding locations, divisions, and specialties. If numbers just aren’t your strong suit or you don’t have the time to devote to tedious bookkeeping duties and Excel spreadsheets, consider hiring a CPA (certified professional accountant) to provide bookkeeping services. An accountant helps reconcile day-to-day books, close end-of-months, and prepare quarterly or annual taxes. In addition, they can provide other accounting services, like managing payroll and purchase orders.

You can hire an in-house accountant or work with a consultant. To maximize an HVAC company’s software investment, ServiceTitan’s Certified Provider program matches customers with professional consultants, including accountants, who possess a deep understanding of ServiceTitan software. Accountants in the Certified Provider program include Out of the Box Technology, Contractor in Charge, and Baker Tilly.

To get connected with a ServiceTitan Certified Provider, fill out this form. 

Now Over to You

Contractors face stiff competition in the home services industry, and must learn to convert more customers and keep existing clients loyal—while retaining top talent and protecting their margins. This requires careful accounting, whether handled in-house or outsourced.

Add the above tips to your regular operating procedures to level up accounting at your HVAC business. In addition, invest in business software solutions that automate bookkeeping and reporting features to free you up to spend more time growing your HVAC business.