Editor’s Notebook

THE HVACR MANAGEMENT MAGAZINE

TERRY Tanker Publisher ttanker@hvacrbusiness.com

HEATHER Langone Managing Editor hlangone@hvacrbusiness.com MEGAN LaSalla Art Director mlasalla@hvacrbusiness.com

BRUCE Sprague Circulation Manager bs200264@sbcglobal.net BARBARA Kerr VP Operations bkerr@hvacrbusiness.com ADVERTISING STAFF ERIC Hagerman VP Sales Tel 216-409-3246 ehagerman@hvacrbusiness.com TERRY Tanker Publisher Tel 440-731-8600 ttanker@hvacrbusiness.com

HVACR Business, founded January 1981, is a monthly national trade magazine serving contractors, mechanical engineers, manufacturers, manufacturer representatives, wholesalers, distributors, trade associations, and others in the heating, ventilating, air conditioning and refrigeration (HVACR) industry primarily in the U.S. The editorial focus and mission of HVACR Business is to provide business owners and managers with the very best business management concepts available. Critical topics covered include leadership, management, strategy, finance, sales, marketing, training, education, staffing, operations, human resources, legal issues, customer service and more. We are dedicated to helping contractors master these key management skills and provide them with the resources necessary to build strong, profitable companies. Every effort is made to provide accurate information, however, the publisher assumes no responsibility for accuracy of submitted advertising and editorial information. Copyright©2022 by JFT Properties LLC. No part of this publication may be reproduced or retransmitted in any form or by any means, including, but not limited to, electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees. This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the authors nor the publisher may be held liable in any way for any interpretation or use of the information in this publication. The authors will make recommendations for solutions for you to explore. Any recommendation is always based on the authors’ research and experience. The information contained herein is accurate to the best of the publisher’s and authors’ knowledge; however, the publisher and authors can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. Subscription Rates: Free and controlled circulation to qualified subscribers. Non-qualified persons may subscribe at the following rates: U.S. and possessions: 1 year $48; 2 years $75; 3 years $96; Canadian and foreign, 1-year $108 U.S. funds only. Single copies $8. Subscriptions are prepaid, and check or money orders only. Subscriber Services: To order a subscription or change your address, write to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039 or call (440) 731-8600; or visit our Web site at www.hvacrbusiness.com. For questions regarding your subscription, please contact bkerr@hvacrbusiness.com. HVACR Business (ISSN 2153-2877) Copyright ©2022 is published monthly by JFT Properties LLC,31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039, Phone: 440731-8600. Periodicals postage is paid at North Ridgeville, OH and additional mailing offices. (USPS 025-431) POSTMASTER: Send address changes to HVACR Business, 31674 Center Ridge Road, Suite 104, North Ridgeville, OH 44039.

31674 Center Ridge Road, Suite 104 North Ridgeville, OH 44039 Tel: (440) 731-8600 Web site: www.hvacrbusiness.com (ISSN: 2153-2877) www.hvacrbusiness.comwww.HVACRBUSINESS.comwww.hvacrbusiness.com

BY HEATHER LANGONE EDITOR’S NOTEBOOK

Contractors: Start 2023 Fiscally Fit

It’s time to review your fiscal year-end checklist. Year-end accounting does not necessarily always refer to January through December.

Most small businesses do choose the 12-month period or fiscal year that matches the annual calendar. However, not always, some businesses tailor their calendars to align with busy quarters or busy industry seasons. So, while December might not necessarily correlate with your end fiscal review, no matter your preference, setting the calendar to do a traditional “end-of-year” fiscal review is always a good practice. Set an appointment in November with your financial team to make sure your books, accounts receivable, accounts payable, balance sheets, and inventory reports are all in order as you head into 2023.

YEAR-END FINANCIAL SUMMARIES

Many companies jump from year to year, and if they continue to see an annual profit, they pay little attention to balancing year-end books or creating end-of-year financial reports. Not only is this bad for business, but it can affect a successful sale or transition when you choose to retire. It can also impact taxes, and affect profits, especially if there are errors in accounts payable vs. receivables.

Here are my editor’s tips for getting your year-end accounting in order before tax season.

1. CHECK ALL INVOICES – PAID AND OUTSTANDING

Most financial platforms and reporting software allow you to track invoices, both paid and outstanding. Now is the time to make sure that all your invoices were sent, paid, and paid in full. If there are any outstanding from the past 12 months, try to collect or settle these balances so that they do not carry over into the new year. Correct any errors in invoicing. This also means making sure that invoices match inventory reporting, balance sheets, and amount billed vs. amount paid. If there are outstanding invoices, now is the time to set reminder alerts and schedule invoice follow-ups to go out in December.

2. EXPENSE REPORTS

Do a cross-check on expense reporting. Are all your expenses recorded? If not, update that report. And if any outstanding expenses require reimbursement – i.e. reimbursing employees with expense accounts for expenses they paid out of pocket – set a reminder to settle those amounts by year’s end. This is a very important step that when missed, can greatly impact the deduction amount on your taxes, as well as proof of expenses if

Set an appointment in you are audited. November with your financial 3. VENDOR BILLS OUTSTANDING team to make sure your books, In addition to making sure all of accounts receivable, accounts your customers pay you, you need to square away any unpaid vendor debts payable, balance sheets, and your small business has accrued. inventory reports are all in 4. MILEAGE ACCOUNTING order as you head into 2023. Most HVACR companies have software that tracks mileage for field service accounting and business mileage tracking for sales execs. Make sure that this account is up to date. Review all mileage reports, balances on outstanding gas cards, and GPS tracking. Make sure all field service technicians’ mileage has been tracked and accounted for throughout the 12 months. Run reports and crosscheck all to ensure that balance sheets are accurate and that all mileage has been tracked and accounted for on all business vehicles.

5. PAY VENDORS

Pay outstanding bills from the previous year. You can’t pay all of them, some will carry over, but crosscheck inventory, vendor, and outside contractor invoices with outstanding bills, reconcile and if there are no errors, pay them. It’s a best practice to go into the new year with as little debt as possible. Finally, one last tip which may seem obvious – but contractors have been known to skip the following – triplecheck your bank statements to make sure they match all financial reports for accounts payable. Cross-check what was invoiced, paid, ordered, and expensed to make sure the numbers balance out in case there are errors as in your doublepaid, or in the worst-case scenario, theft. For more in-depth information on staying fiscally fit in HVACR, be sure to read our resident financial expert columnist, Ruth King’s monthly column. She offers invaluable advice monthly, replete with graphs, examples, and intricate checklists. Subscribe and follow her column – it’s like having a front row to a lecture with one of the most respected financial HVAC experts in the industry. To send comments and inquiries please email hlangone@hvacrbusiness.com. And to read more of Ruth King's column, go to www.hvacrbusiness.com/staff/ruth-king