Bookkeeping for Roofers | Monthly Close, Inventory & Bank Reconciliations

Running a roofing business isn't just about shingles and sales. It's about tracking every dollar. And believe it or not, you're bleeding cash without even knowing it. I'm Adam Sand, CEO of the roofing business partner. In this video, I'll break down roofing financials in the simplest way possible. Using a lemonade stand to make it all make sense so you can stop guessing and start growing real equity.

Running a roofing company is a lot like running a lemonade stand. If you have a lemonade stand, every day you're going to sell lemonade or fix roofs. People are going to pay you money. You keep this money in your big jar, your bank, but every evening you're going to kind of counting the money in your jar to see how much money you made. And you also have this special notebook where you write down every time you sell lemonade or every time you sell a job and how much money you should have in the jar so that the jar should match the book. And sometimes the bank will give you a little extra money for keeping your money there. That's like your interest income. And sometimes the bank takes a little bit for letting you use their jar. Those or your bank service charges. Then you need to make sure the money in your jar and the money you wrote down in your book are the same. And if they're not, you need to figure out why and fix it. Because this is where you find hidden losses in your company and it creeps up on you. But then sometimes you have to give a check to buy more lemons or roofing materials, but the person you gave it to forgets to take the money from the jar. They don't cash the check. You can't look at that as money in your bank account because that is just an unincurred expense. Right? That expense has not been incurred to the business yet in terms of like, the cash account hasn't been deducted, so you kind of have to deduct it from your cash account so you know it's not there. You can't look at your bank account and do your accounting from there because it's not real. Then sometimes you're have a friend give you money for lemonade that they're going to drink later. So this would be like a deposit on a roof. But you forget to put the money in the jar. You got to have note that like, you took that money. This is how salespeople steal. Then you need to look through your notebook for any checks that you wrote that might not have been taken out of your jar yet. So you can reconcile that. So as the owner of the roofing company, you're making sure all the money you're making from fixing roofs or selling lemonade is just right in your jar, which is like your bank, and it matches what you wrote down in your special notebook. Because then you'll also get into accounts receivable, which is another book inside your book. Those accounts are like little books inside your book. It's your piggy bank of piggy banks. This particular book, it helps you remember who owes you money and how long it's been since you did the job or sold your lemonade. And then every so often, you're going to sit down and look through your special book, usually on a monthly basis. And this helps you quickly see who's forgotten to pay you for your lemonade or your roofing jobs. And sometimes you realize that someone who said, I'll pay you later a long time ago also might never pay you. Other times, you might have given someone too much lemonade by a mistake or they paid you too much last time. This comes up more in commercial or service and repairs, and this helps you know exactly how much money you actually have or you can expect to get soon. Again, this is why you can't do it from your bank account. The other thing we deal with in roofing is inventory. I just talked to a company yesterday. They did 1.2 million in service work, and I think they're about 5 or 6 million. And they have inventory that they're keeping on a spreadsheet, but the accountant doesn't actually keep track of how much inventory they have. And so you're gonna have a big chest where you keep all the things that you need, and you need to make sure exactly how much it's in there and how much it's all worth. And every so often, you're gonna count everything inside the big chest. It's again, using the lemonade analogy. This would be like lemons and salt, sugar, and other things you might put in lemonade, I can't think. But this helps you to know if you can make more lemonade or fix more roofs without buying more supplies and how much money you spent on what's in the chest. A lot of people are doing bulk buying now, and so more roofers are starting to see the value of buying in bulk and maintaining an inventory, which means you have to have a shop space. You have to justify the shop space, the chest, by knowing how much money you're saving on it. And you don't want shrinkage of your inventory, but it's going to happen. You're going to have guys that when they go to pick up a pallet, they stab it with the forks and they wreck your shingles and it can't be used anymore. So you have to kind of get that out of your inventory. So you have to make note of it so you can remember not to count them next time. And you might have to decide to throw it away. And now it's money that you spent that now disappeared because it was sitting in inventory is kind of like an asset, but then now it's gone because it's garbage now. So you're literally throwing money in the garbage. You have to account for that on your books. And this is the way of making sure your Trevor chest is like, full of good stuff and not filled with things that you can't use. You're updating your inventory. Another thing that you're going to have is fixed assets. So again, thinking of your lemonade stand or your roofing company, you have a big, sturdy table. You got a fancy sign just like your trucks and ladders for your roofing. These are like your big toys that don't get used up quickly like inventory. So every time you get a new big toy, like a ladder or a truck or a. An old one breaks and you throw it away, you got to write it down in your big book. That helps you remember what big toys you have to play with or work with. Sometimes your big toys get a little bit older and aren't as shiny as they once were. Sometimes you pretend that they lose a little bit of their magic every year. This is depreciation. Then there's also intercompany accounts. So if you and your friend both have lemonade stands or have roofing companies and you sometimes share lemons and sugar or materials and tools, you write down what you share. So this could be intercompany. This is sometimes like Apple roofing has Apple roofing and RAM distribution. So technically it's two companies. So you will have intercompany accounts, even accounts that you own is what I'm trying to get at. Once you do all this, you want verification. So you want to verify that these things are done right. So you're maintaining two sets of books. And you're almost like you want to make sure that whoever owes money to whom you'll also have prepaid expenses. Where sometimes you give somebody money ahead of time, like your mom to buy you lemons for next week. You're like saying, hey, I'M going to need lemons next week. Next time you go to the grocery store, can you get me some lemons? So you have prepaid expenses, verification, amortization. Remember, you already paid for those lemons. And each time you get the lemons, you don't need to pay again until your prepaid lemons are used up. So our customer that prepaid for six months of marketing, they have to verify that, okay, I got my marketing, and I don't have to pay again for five months, four months, three months, two months, one month. So you gotta kind of know when that's coming up. And the same thing goes the other way when you have your friend who promises to give you next month for borrowing your ladder. So sometimes you have notes receivable, you have those same kind of concepts on the other way. And you want to make sure you get verification from that as well. And then it goes into accounts payable. When you owe money to the store for lemons for your roofing supplies or rbp. Right. If you're on a consulting agreement with us, you know that you have an accounts payable every month for that $2,500 consulting fee. Or if you bought a CRM from us on financing plan, you know that every month you have that accounts payable. So even though that money is in your bank account, that money's not yours because you know you have that expense coming up. And some of this might feel extremely basic, but there are things like this that creep up on people. I mean, the CMR $150 million company went bankrupt because Acculinx was not reporting stuff like this because they had these accrued expenses and liabilities, and they weren't verifying it and calculating it every month. And so then they ended up getting in trouble. And hopefully what you with is an accrual of equity. This is keeping track of your own piggy bank. The money you put from all your lemonade sales or all your roofing sales. That is correct, because that's your equity. What you're ultimately building this for is equity in your business. And what is the value of that equity in your business? And you want to make sure again, that's verified. And so as you go through, you're going to have all of these accounts, your regular expenses, and you're going to have expenses that are operating expenses, and then you're going to have capitalized expenses. Things like your CRM is a capital injection into the business. It's not an operating expense. The money that you spent on RBP is a capital investment into the business. All of this just comes down to review and accuracy. And that's why you have to do that monthly closeout. You have to be able to look at that big book and make sure everything makes sense for the end of the month. And by keeping track of these things, just like if it's a managing a lemonade stand or running a roofing company or a consulting company. Doesn't matter. You got to make sure your roofing company is running smoothly and you're prepared for the future and you know exactly how your business is doing.