Profit & Loss for Tradies | Cairns & Brisbane Bookkeeping
Updated: 3 days ago
Mid-Month Is a Good Time to Check Your Profit and Loss
Running a trade business in Cairns or Brisbane doesn't leave a lot of spare time for sitting around looking at reports.
By the middle of the month, you're probably already thinking about the jobs ahead, getting quotes out, ordering materials, paying wages, following up customers and making sure there's enough work booked to keep everyone moving.
But mid-month is also a good time to look in the other direction.
If your bookkeeping is up to date, the previous month should now give you a useful picture of how the business actually performed. That's where your Profit and Loss statement becomes worth looking at.
At Tropic Books & Finance, we don't see bookkeeping as something that should only be done because BAS or tax time is coming. Good bookkeeping should give a business owner useful information throughout the year.
For tradies and trade businesses across Cairns and Brisbane, a regular look at your Profit and Loss can help you understand whether all that work you're doing is actually producing the result you expected.
Start With Last Month
Your bank balance tells you how much money is sitting in the bank.
Your Profit and Loss statement tells you something different. It brings together the income and expenses recorded for a particular period so you can look more closely at the financial performance of the business.
A busy month doesn't necessarily mean it was a profitable month.
For a Cairns electrician, Brisbane plumber, carpenter, concreter, landscaper or other trade business, sales might be strong, but so might the costs required to generate those sales.
When reviewing the previous month, some of the areas worth looking at include:
sales and other income
materials and direct job costs
gross profit
employee wages and associated costs
subcontractor expenses
vehicle expenses
tools and equipment costs
general business overheads
net profit
expenses that look noticeably different from previous months
is there any one off expenses this month or quarter
what is your work in progress figure (WIP, work under way but not invoiced)
The point isn't simply to find the profit number at the bottom of the page.
It's to understand how the business arrived there.
Turnover Doesn't Tell You Everything
Tradies can be particularly focused on increasing turnover. However, It's easy to think the business is doing well because the calendar is full, invoices are going out and plenty of money is moving through the bank account.
But turnover and profitability aren't the same thing.
Materials may have become more expensive, you've needed additional subcontractors to complete jobs, or wages are consuming more of your income than they were previously.
An hourly rate increase to your staff without increasing your sales price will mean you are making less money.
Your sales volume could increase while the amount you're actually retaining from that work goes the other way.
That's why trade business bookkeeping should be about more than keeping records up to date.
The numbers should help you ask better questions about the business.
Are jobs being priced appropriately?
Are direct costs increasing?
Is gross profit moving in the right direction?
Have overheads crept up?
Is additional turnover actually producing additional profit?
These are much more useful questions than simply asking how much money came in during the month.
Compare the Quarter, Not Just One Month
Once you've looked at the previous month, take a step back and look at the quarter as well.
One unusual month doesn't necessarily tell you much on its own.
Comparing several months can give you more context.
For example, you may notice:
revenue increasing while profit remains relatively flat
materials consuming a greater percentage of sales
wages increasing faster than turnover
subcontractor costs growing
gross profit changing between periods
vehicle or equipment expenses increasing
overheads gradually moving higher.
There's nothing wrong with costs increasing when there's a good business reason for it.
The important thing is knowing that it is happening.
For Cairns tradies, changes in workload, staffing, materials purchasing or business activity can affect the numbers from one month to another.
The same applies to growing Brisbane trade businesses managing larger crews, more vehicles, equipment and multiple jobs.
A quarterly comparison puts an individual month into better context.
Good Xero Bookkeeping Makes the Numbers More Useful
Keeping your bookkeeping up to date is important.
A business report is only as useful as the bookkeeping behind it.
If bank transactions haven't been reconciled, supplier bills are missing, sales haven't been recorded properly or transactions haven't been correctly allocated, the Profit and Loss may not provide the picture you expect.
That's one reason we place so much importance on keeping Xero bookkeeping current.
Regular bookkeeping gives business owners the opportunity to review more recent information instead of discovering an issue months after it occurred.
For a tradie managing jobs across Cairns or Brisbane, that becomes particularly useful when you're dealing with a mixture of:
customer invoices
supplier bills
materials purchases
payroll
subcontractors
fuel and vehicle expenses
tools and equipment
finance repayments
general operating expenses.
A clean set of books gives you a much better starting point for understanding where the money is going.
Regular Bookkeeping Helps With BAS Preparation Too
Keeping the books current isn't only useful for management reporting.
It also means there's less catching up to do when BAS time arrives.
Leaving bookkeeping until the end of the quarter can mean working through weeks or months of transactions at once.
Keeping on top of it throughout the quarter creates a much more orderly process.
More importantly, it changes the purpose of bookkeeping.
Rather than maintaining the accounts just because another BAS deadline is approaching, you're building financial records that can also help you understand the business during the quarter.
That's the approach we take to bookkeeping for Cairns and Brisbane businesses at Tropic Books & Finance.
Keep the accounts current. Keep an eye on what's changing. Use the numbers throughout the year.
For Tradies, Keep an Eye on Your Margins
This is particularly important for trade businesses.
Being busy isn't the same as being profitable.
You can have plenty of jobs on the go and still find that margins are getting squeezed if materials, labour, subcontractors or other direct job costs are increasing, or the job hasn't been priced properly at the start.
Back costing all or a selection of jobs will help you keep check on your margins. This takes time, but is very important for business improvement.
The numbers can also help you think differently about quoting.
If you're consistently completing more work but the additional activity isn't flowing through to improved profitability, it's worth investigating what has changed.
That could lead you to review job pricing, purchasing, labour costs, charge-out rates, overheads or the type of jobs you're taking on.
The Profit and Loss doesn't make those decisions for you.
It helps provide the information needed to start asking the right questions.
Don't Leave the Review Until the End of the Financial Year
For us, this is the biggest opportunity.
Your bookkeeping shouldn't only tell you what happened a long time ago.
If your accounts are kept current, they can give you information while you're still in a position to do something with it.
A simple routine might be:
Keep Xero current. Review last month. Compare the quarter. Look at gross profit. Check where costs are moving. Investigate anything that doesn't make sense.
You don't need complicated dashboards or endless financial ratios to start getting more value from your bookkeeping.
You just need reliable numbers and a regular habit of looking at them.
Bookkeeping for Cairns and Brisbane Trade Businesses
At Tropic Books & Finance, we work with businesses that want their bookkeeping to be more than a compliance exercise.
For tradies and other small businesses in Cairns and Brisbane, keeping Xero up to date can make it easier to understand what happened last month, compare performance over the quarter and keep a closer eye on costs, margins and profitability.
If you're flat out running jobs, managing staff, quoting new work and dealing with customers, it's easy for the financial side of the business to become something you look at later.
Mid-month is a good time to change that habit.
Take a look at last month while the numbers are still recent.
You might be surprised at what they tell you.
Trades we regularly help with Xero Bookkeeping
Electricians and Sparkies
Plumbers
Blocklayers & Brickies
Carpenters and Chippies
Concreters
Landscapers
HVAC and Refrigeration Technicians
Roofers
Tilers
Glaziers
Painters
Builders
Speak with Tropic Books & Finance Today
If you're considering moving to Xero or are looking for a new bookkeeper contact Tropic Books & Finance for a no-obligation discussion.
Simon Smyth
Phone: 0427 216 011
Email: simon@tropicbooks.com.au
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