Roofing Company Expenses

Plan Your Expenses for a Roofing Company

How much money should you make as the owner of a roofing company? The average profit is just under 3.0 percent. Take into consideration your personal investment into your roofing business and the risks you assume, and that margin looks minimal.

However, that number is the average. Some roofers make more, some make less. You want your roofing company to be in the top half, so here are several financial basics to keep you on top of your expenses and increase your profits.

Chart of Accounts

You are a roofer not an accountant. However, if you own your business, you need to have a fundamental understanding of your chart of accounts to keep track of expenses.

1. Revenue. This is your sales figure, which is all the money you receive from selling goods and services. This is a good indication of your roofing company’s health. It is the basis by which most other finance numbers are calculated.

2. Direct expenses. These are known as “job expenses.” They include costs directly related to a job. You want as many of your expenses to fall into this category for tax reasons. You also want to become skilled at projecting these expenses to keep your profits on track. You will find many software programs designed to help you with this. Direct expenses include: workers’ compensation insurance, labor, labor taxes, disposal, subcontractors, job materials, permit fees, transportation, sales commissions, collateral damages, and warranty fees. Typically, direct expenses will be about 60 percent to 80 percent of gross revenue.

3. Gross profit. Gross revenue minus direct expenses is your gross profit. If you have no overhead, which is highly unlikely, this becomes your profit. This is why you focus on keeping expenses under control.

4. Indirect expenses. Indirect expenses are not attributable to specific jobs. These include utilities, taxes, postage, payroll management, phone service, office supplies, rent, legal fees, late fees, insurance, education, subscriptions, bank charges, bad debt, auto service, advertising, and fuel. You may have others in this category too. You can have many subcategories to keep more accurate figures and know where your company spends money.

5. Profit. Profit is a good word, not a dirty word. Your company cannot survive without a healthy profit. You need this investment in new equipment, tools, or vehicles, and to put away savings for capital expenditures. Work closely with your CPA to make sure the numbers are correct to keep taxes as low as possible. A typical tip suggests that you keep profits in the company for a healthier financial outlook. On average, roofers see about 3 percent profit. When you stay on top of expenses, this number can increase.

Managing Your Expenses

You have a wide array of handy tools to help you keep company expenses under control and improve profitability. Instead of mentioning specific brands, look for these types:

1. Weekly cash flow forecasting. Keeping control over your cash flow is very important. How much is coming in versus how much is flowing out. Obviously, you want more coming in. A tool like this will actually help you forecast your cash flow, which gives you time to make adjustments if potential issues are identified.

2. Asset utilization. Will you need new equipment? This tool will help you determine that by quantifying your asset needs with numbers. This tool analyzes your potential increased gross revenue in relation to your assets. It will project sales figures based on a the asset’s cost.

3. Sales trend analysis. Is your sales team meeting goals? Are your short term results predicting long term sales growth? The sales trend analysis software can tell you what you need to do to meet your sales objectives. It will also analyze historical data to project seasonal trends. You can produce a very accurate forecast for your sales team to use.

You may be starting a new roofing company, or you may have been in business for years. Still, keeping control over expenses is a key task to becoming profitable well into the future.