Most Home Service Owners Are Lying About Their Numbers | Chelsea Jamison

Bridge the financial literacy gap: Understand your P&L and Balance Sheet, don't just receive reports. A bookkeeper should not only maintain accurate records but also educate you on what they mean for your business.

Optimize S Corp compensation: If your business has over $50,000 in residual net income, consider electing as an S Corp. Pay yourself a reasonable W2 salary (e.g., $60k-$80k) and take the rest as distributions to reduce self-employment tax.

Correctly account for loan payments: Do not expense entire loan payments. Split them into interest (an expense) and principal (reduces liability and increases equity). Use an amortization schedule or tools like ChatGPT to calculate the split for accurate financial reporting.

Prioritize depreciation: Ensure your bookkeeper captures depreciation on assets monthly, rather than annually, to get a more accurate view of your net income and avoid a large adjustment at year-end.

Pay quarterly estimated taxes: To avoid penalties, pay at least 90% of your current year's tax liability or 100% of your previous year's liability through quarterly estimated tax payments.

Leverage tax-advantaged accounts: Explore options like 401Ks, IRAs, and Health Savings Accounts (HSAs) to reduce tax liability and save for the future. Consider offering 401K plans to employees as an affordable benefit to improve retention and help them save.

Maintain accurate compliance: Ensure payroll taxes and workers' compensation (like L&I) are filed correctly and on time. This not only avoids legal troubles but also provides crucial support for your employees and peace of mind for you.