Austin Gray: Hey, welcome back to another episode of the OWNR OPS podcast. I'm your host, Austin Gray. In this episode, we have Ben Gavin from Dialed In Bookkeeping joining us. Ben is going to share with you how to set up your bookkeeping if you're an early-stage owner operator or if you've just started your business. This episode is going to be very applicable to what you are doing. He's also going to give you some basic definitions that you need to know as a business owner, and then finally he is going to give you a strategy for implementing a job costing system.

If you guys have anybody else who offers professional services for service-based businesses, have them reach out because I am opening up more sponsorship slots in the podcast. I hope you are getting value out of it. If you are, please take 30 seconds and leave us a five-star review on Apple or Spotify; it sure helps us grow the podcast. If you're listening on YouTube, we would sure appreciate a like and subscribe. You'll get notifications each week.

Then finally, check out the newsletter we are putting together from each episode. We're distilling all the learning lessons out of that, and we send it to you in a weekly email on Saturday mornings. So go to ownrops.com/newsletter, that's ow n r ops.com/newsletter, to get those learning lessons to help you grow your own service-based business in your own local market.

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Austin Gray: Welcome back to another episode of the OWNR OPS podcast. I'm your host, Austin Gray, and in this episode, Ben Gavin is joining me from Dialed In Bookkeeping.

Ben Gavin: Thanks, Austin. I appreciate you having me on, man. How did you get into the bookkeeping business?

Austin Gray: It's kind of a long and winding tale, but that's what podcasts are for, so I'll give you the story.

I started back in college where I was walking to class one day, and there was a flyer on the ground for a college window cleaning franchise. It was, "Be Your Own Boss, run your own business." I was about 18 at the time, and if you're unfamiliar, College Pro was formerly known as "Rest in Peace." There are probably a bunch of College Pro people secretly out here. They would teach you how to run a business. It was like a not rocket science trade, right? We did window cleaning, which you could learn how to do in two hours, and then you learned how to run the business in two days, type of deal.

We did that all through college and we crushed it. We did a really good job, and I was totally hooked on running my own shop at that point. The reason I stopped doing that was that when it netted out, there was like a 20% royalty because the risk from the franchisor side was super high. I was 18 and one of 10 people who actually made them money, so the royalty was really high. Therefore, it wasn't sustainable and I didn't want to mess with that.

After school, I went into software sales for a little bit, and then I ended up back in the service land. My old coach, who had been at College Pro with me, worked at a restoration company—so property restoration for fires, floods, sewage backups in homes and businesses. I started actually as a tech because they didn't have any managerial roles or anything, and I was so desperate to get out of my office job that I was like, "I'll do literally whatever you have."

I was on call there, water restoration certified, cutting down walls, sucking up water, and did that for about a year. We had no systems or processes, so I ended up implementing a full company-wide field management system. That was my introduction to QuickBooks and figuring out how the time we logged on the job tied back to the financials. This company now does, I think, around $25 to $26 million, but at the time, we were doing $2 to $4 million, so it was much smaller.

I ended up doing that, but with a small company, if you’re the IT guy, you run out of things to do very fast. You get everyone ready, you lock them in, train them up, and then they say, "Alright, cool, we need you to go back in the field." I was like, "I kind of like this technology stuff."

So I ended up going back to software sales and then started a business with a couple of guys—that was the worst business of all time. It was called the Boot Buyers Club. If you look it up, there are some funny clips on YouTube of us smashing boots with sledgehammers and doing product tests by the railroad. It was really fun, but the concept was supposed to be direct-to-contractor boot sales.

It's the one part of your staff's equipment that you don't legally have to provide, but you're liable if they get hurt. So we thought, "Oh, that's an easy win!" It was not.

People are very picky about their footwear, and we didn’t test it before—if you start a business, you should test it small before you go all in. We didn’t do that so then that business was failing. One of the investors was like, "Hey, I have this low-voltage subcontractor that I'm invested in in Wisconsin, and I don't know what's going on with their money—they keep running out of money. Can you go in and be my CFO guy?"

The mentor of mine, who's a decamillionaire and lives down in Florida now, said, "I'll pay you a salary starting tomorrow," and that was key because we were running out of money trying to sell boots to ghosts. I had no formal bookkeeping training, but I got pushed in. There were 12 guys on the team, and I had to figure out how we were going to hit payroll, where all this money was coming from, how we were going to collect money, how we were invoicing, why we weren't performing like we wanted to.

Long story short, the reason for their troubles was that when you get into bigger jobs, you want to do progress invoicing so that you can get paid throughout the projects. If it's like a $400,000 project, you do $200,000 upfront, then $100,000 at something, and then $100,000 at the end—something like that. They were invoicing for $400,000 for a 12-month project right at the front, so their AR looked spectacular but it was uncollectible because it shouldn’t have been invoiced yet. That took us about a month to figure out because I had no formal training on how that all worked. Anyway, we ended up getting that stabilized, but that was the most stressful 18 months of my life, for sure.

I left that because my wife and I got married, and then we went to Asia. I worked remotely, and what I was doing remotely was kind of what our business has turned into now, which was consulting with construction and home services companies to help get accurate, up-to-date information out of their team. The bigger the team, the harder this stuff is to manage because you have 10 people who can go buy materials—you need to track what job it is; you gotta make sure your credit lines are accurate. I had learned that through experience, and now I just did it on a fractional basis.

After that very stressful, but not like hindsight 2020, very, very awesome experience, I started doing consulting. Then the pandemic came, we came back from Asia, and I got another sales job. I was like, "Alright, the consulting wasn’t... it was floating us in Asia, but it’s about four times more expensive here in the States," so I got into a sales job because those are easy to come by. I actually launched an exterior second business during the pandemic because I was bored. We ran The Handsome Home, which I still think is a great exterior cleaning business name that someone can steal if they want—I didn’t trademark it.

I ran that for two years, but it got too stressful because my first child, my daughter, was born right at the tail end of that. But throughout that whole time, I’d been doing bookkeeping for people and helping out—it was easy. It was on the side. Just under actually three years ago today, November 1st, 2021, I decided, "This is what I'm going to focus my time on." I grew Dialed In Bookkeeping from zero to 45 clients over two and a half years while also working a full-time job.

Two months ago, I went full-time, and we've already added, I think, 10 to 15 more clients since I went full-time. So, it’s a long and winding road, but now we’re here, and I really like this business. I think it's fun and rewarding to help people get clarity on how they're doing. People sign up with us for two reasons: "I just started and I know I shouldn't do this and I have no clue what's going on—can you help me get an idea of what's happening?" So those are the two times we get people. Either way, it's fun.

Austin Gray: You've got a cool story. It's like, you know, at a certain point in life, things add up. As entrepreneurs, there's no shortage of ideas, or there's no shortage of, "Hey, there’s opportunity here," or, "I think I can sell boots to contractors because there's a pain and there's a problem," right?

I've had my fair share of businesses in my 20s that I’ve tried to start that I look back on and I’m like, "What the heck was I thinking?" That was the same thing in my 20s. I was just taking as many swings as possible, trying to figure it out, and at some point, it finally clicked into something.

Ben Gavin: Well, it's funny because, Ben, how old are you?

Ben Gavin: 32. I’ll turn 33 in a month.

Austin Gray: Okay, so we’re the same age. Yeah, we grew up in the same time frame. It’s interesting because as we got out of college, everybody was doing a tech startup. Everybody was in software sales or doing it. The business to start was an e-commerce business—that was what everybody was doing courses on: agencies, you name it, right?

In all reality, you read about the 0.01% of the 1% of people who do a tech startup and scale it to multi tens of millions of dollars. I jumped in and kind of drank the Kool-Aid on that multiple times, as you heard, and it’s always tempting—now it's not—but before, like when I was just trying to figure out how this was going to work and where I was going to make my market, it’s like, "Well, we could do... Should I try to learn to code?" That was a bad idea.

I tried to be a web designer; I am, as you can maybe tell by my outfit, not a designer. I'm very bad at anything related to design. I tried a bunch of stuff, but if you keep hammering and keep going, you eventually headbutt your way into something—most people do. A lot of the stories I hear are fairly similar. It's like, "I used to do this thing, and this thing, and this thing, and then I put it all together and now I do this thing."

Ben Gavin: Great, dude. It's so true. And what you’re in now—bookkeeping—it’s a necessary service for every single business.

Austin Gray: Yeah, for every business.

And I don't know about you. You mentioned kids—I’m married, got one kid, another one on the way—and there's nothing, there's no greater motivator. It’s like I don’t even really care what service I’m offering as long I’m doing something that I’m building a business where it’s a necessary service; people are paying us money, and I’m able to provide a home and a good life for my family. Like that’s the motivator right now.

It helps you get back to work when you had to put your son down two times at 1:00 a.m. and 4:00 a.m. and you got a meeting at 6:30 with your Filipino team. It's like, "Well, we gotta do it." So finding a good service that people need and you provide well—like it’s that simple. It doesn’t have to be like a mind-blowing crazy. If you can build an awesome piece of software and make a bajillion dollars, that’s great, because I've tried to build software, and it’s hard—really hard.

If you want something a little more manageable and a little more reliable, that can still make a good income doing things for other people—services are a great way to go. It’s much, much simpler and easier to start.

We had one of my mentors—four little rules. If you want to make money in the service business, it’s: show up on time, do what you said you were going to do, pick up the phone, and clean up. If you do those four things, you’re good. You just gotta kind of have those core traits and a little integrity, and you’re going to be fine.

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Austin Gray: So we've had similar stories; we've come back at 32-33 years old to offering services that are just necessary in our own markets. Mine was I started with the chainsaw—I literally just started cutting trees because people needed Deadwood cleaned out of their properties and charged money for it.

Yours was, "Okay, I'm doing bookkeeping services because people actually need this and they’re willing to pay for it."

So let's talk about getting those first clients. You see this opportunity. What are some things that you would recommend to those first people to just start with?

The reason I'm asking this is because a lot of our listeners have reached out and they’re like, "Hey, I've started this business." Take my little brother, for example. He started a power washing business. He’s just running and gunning, just selling jobs, spraying horse trailers, just like making $100-$200 in college on the side, right? But he’s like, “I’m building a legit business and I need to track my expenses. I don’t know anything about QuickBooks. I don’t know anything about bookkeeping. Where do I start?"

Ben Gavin: Yeah, sorry. I’m a visual guy, so I have a little tab here that I prepped that can help us walk through this.

So, bookkeeping itself is the practice of just keeping your straight. There are a couple of very simple things that you can do, and with like an hour on YouTube, you can figure this out and have the dead basics good to go in a pretty reliable way. You’re going to get stuck eventually because weird stuff happens all the time and you’re going to have a lot of questions, but at least understanding the core mechanics of what to do is a good exercise.

So, the first one is to set up QuickBooks Online. There are other providers; I haven't found one that’s better. QuickBooks is obviously a giant in the industry, but their starter plan is still only like $30 a month, and it works very, very well. We have a bunch of clients on that—no need to make it complicated.

The second thing is to connect your bank accounts to QuickBooks. Assuming you know nothing, QuickBooks is accounting software that helps present financial information. It takes streams of data from banking institutions—and we'll just assume just Banks—so that's like checking accounts, savings, credit cards.

It connects to those banks, and every time a transaction happens, it gets pulled into QuickBooks. We categorize it and put it in the right spot. That's what connecting the bank accounts means.

So all your data is now going into QuickBooks, and then your QuickBooks is your source of financial information. Again, if you watch like an hour of YouTube, you can get the basics on this stuff.

What happens is when you have your bank feed come through and you have all your transactions, it’ll load up. I would show this, but we don’t have a demo account set up and I can't show client information—it's confidential. I'll try to maybe produce something after for everyone to go through.

But you clear the bank feed, so all your transactions from the last week—you need to go in and click on them and say, "Okay, this one was for sales, this one was materials, this was for gas." So you just categorize what things were—really, really basic.

Then, reconciliation is a monthly task. I won't go too deep into that; this is kind of like the most optional one when you're just starting. Long term, it’s an absolute 100% must. But what reconciliation means—to define for people—is that you have your bank feed coming into QuickBooks and you have all these transactions and information.

Well, how do I know that that information is accurate versus what the bank has on file? So you go to the bank on your online portal, you get your statement—you just go click around and find your statement for one month. A reconciliation process is making sure that what is in your QuickBooks file matches what is in your bank statement.

You might be thinking, "Why do we do this? It's pulling automatically,” blah, blah, blah. QuickBooks can miss things; there can be duplicates that come through, and you can add things manually to QuickBooks on accident that didn’t actually happen. That’s why you need to check the bank statement versus QuickBooks.

Going really far back, the reason we have QuickBooks is before we had software, people did this literally in a book. So there would be a book, and it would have two sides on it—it would be like money in and money out, and it would be each account—so sales, bank account, credit card. They didn’t have credit cards probably when they had books instead of software.

But that’s why it's called QuickBooks, and that’s why this is a necessary process because if you don’t reconcile on a monthly basis, you’re going to get to a certain point where all your numbers look very weird and you can’t pinpoint where it started to go wrong.

So, that’s the reconciliation process. If you have a basic setup and let’s say, you know your brother’s Austin—your brother’s pressure washing—he's got himself a pressure washer and a couple of jobs, you guys can reconcile on your own. Just spend 20 minutes watching the QuickBooks Online training on how to do it, and then do it on your own for the first time.

That happens monthly. What you’ll do is clearing the bank accounts every week; you reconcile every month. By the way, clearing the bank feed weekly—if you’re just starting out under $500k, this should take you 10 minutes. Reconciling monthly should take you 20 minutes. If you get stuck and don’t know what’s going on, it’ll take you longer.

Feel free, if you want, you can send me a direct message on Twitter and I’ll try to help you out.

Then the basics of reporting. You’re doing all this—steps one through four are essentially organizing your transactions to make something that you can look at and make decisions off of.

So it’s like you have this whole Lego set; you put it together and now it’s the Death Star, or something like that. Now that you have all your stuff sorted and reconciled, you can look at your reports and you can look at these figures and help get an idea of what’s going on.

So, revenue, aka sales, is how much money you received from customers for performing services. If you put money into your bank account from your personal checking because you’re low on cash, that is not sales. That’s something completely different—that’s out of the scope for this conversation, but that does not count as sales. Revenue is only money that you've received from customers for doing stuff or for planning to do things if you're getting a deposit.

The second thing is the cost of goods sold. These are expenses—money going out that are directly related to fulfilling the service for your customers. For pressure washing, that’s chemicals, water—if you have your own water; I also like to throw gas in there for the production vehicle.

So if you have a truck that you use solely for work and it's used to get from job to job, I throw that in there because if we don’t have any gas, we can’t run the pressure washer; we can’t run the truck, so gas helps us run the job. This gets nuanced over time, but to make it easy: if your truck is only used to drive to jobs and do things, put it in cost of goods sold. If it’s not, put it down here in expenses.

Say you’re driving around to do estimates, or maybe you want to split it 50/50. Again, to keep it simple, pick one and stick with it.

This next one, GP, is gross profit. There are two ways people talk about gross profit, and some people will say profit, and everyone who’s posting something on Twitter about a screenshot rarely shows their profit numbers—they usually show their revenue numbers. You can’t eat revenue is a good thing to remember, right?

So, what the calculation here is gross profit is revenue minus cost of goods sold. If a customer pays you x bucks for pressure washing, your margins should be fairly high. So let's say it costs to pay a guy to do it; the job takes four hours. He’s getting paid $25 an hour; maybe there are two guys on the job. So you have an $800 gross profit.

That's what that would be—$1,000 in revenue from the customer to do the job, and then minus the $200 you’re paying for labor. You have a minuscule amount of chemicals and water. Let’s just say that’s like zero for now for easy math. Your gross profit in dollar perspective would be $800.

Gross profit is super important because it’s, in my mind, the second most important number behind the sales number. Because let’s say you do this $1,000 job and you pay $1,100 in labor—you just paid; you just lost money, right?

If you’re not tracking your gross profit, and you’re not learning how much money you’re making on your jobs, then you can’t improve and create more profit for yourself to grow your business. You need to keep your gross profit as high as your market can tolerate for the good of your business—providing a good service for your customers.

There’s also what’s known as the gross profit margin or GPM. This is your gross profit dollar amount divided by your revenue, aka the percentage of sales that becomes profit. This number is super useful because in our happy pressure washing example we made $800 out of a $1,000—that’s an 80% gross profit margin, which is pretty nuts.

Let’s just keep it positive and say that we’re going to do that. When you go to bid bigger jobs, smaller jobs, you have that marker in your head where you're like, "Oh, 80% is what I will make on that job." So that’s how you can use that.

So like, let’s say you’re doing residential power washing—little home, little home, little home—and then you get five McMansions in a row where you can just take them out. Take, "Okay, I’m going to make x% on this based on my knowledge of my previous jobs. They’re x more square feet and I can do my math and get a number that will work for you.”

Ben Gavin: The thing that happens to a lot of people, Austin, is like if you get started, you start rolling, you don’t know what your numbers are, you’re just bidding randomly, and you have no idea if you’re going to make money or not. Doing your books and knowing your gross profit margin and being able to post-jobs/check job costing will allow you to look at that and see, “Okay, so I was budgeting for when we did window cleaning—it was like, alright, I thought this would be 10 labor hours and then I’d make 60% on that.

It looks like it was 14 hours, and I made 40%. Where did I go wrong?” And then you can change how you do your estimates.

That’s how that is super useful. I can't harp on this one enough. Just understanding your gross profit—how much profit you make on a job from a percentage basis—is super useful. So, anyone who’s just starting out, if you get your transaction started and you can get revenue, COGS, and a gross profit number that’s accurate, then you’re ahead of a lot of people.

The next three are real easy. Expenses are overhead stuff that you pay for that is not job-related. Let’s say this is auto repairs, insurance, garage rent, software—that stuff you try to keep as effective and efficient as possible. You don’t want it to go to zero because that’s probably not good, but you don’t want it to be too high, because that’s not good either.

Net operating income—we’ll take NOI out for now—so then net income is the bottom line: gross profit minus expenses how much we made on jobs minus stuff we had to pay for in order to run the business.

Those would be my dead basics, and I think that took me like 15 minutes, so I’m sorry that I was just chatting the whole time.

But this scales as well. So like this is the same stuff I talk about with my biggest clients. The main thing that becomes a problem when you get bigger, so like four, five, six, 10, or 20 million, is just the mechanics of actually tracking your gross profit.

This becomes very difficult, so this is the same stuff big businesses look at that you can use as a small business. If you understand it when you get started, you'll be in a good spot.

Austin Gray: So anyway, long-winded answer to the question! I hope that we’re still there.

Ben Gavin: This is an incredible overview. I especially think for anybody who's getting started and doesn’t know the definitions of these terms, I believe you put them in very basic terms.

And I would agree with you—if you're just starting your business, rewatch that because you did a really good job, Ben, of explaining that.

Now, I want to be cognizant here. You mentioned in pressure washing the 80% gross profit margin. Like, I want you guys to hear this. If you're just starting out, is that going to be your gross profit margin whenever you're starting a pressure washing business as a solo owner operator?

Ben Gavin: Yeah, maybe. Right? You want to make sure that you are calculating your time. Make sure if you’re doing the job, add your labor in there for what you could pay someone else if you were to hire them to calculate your gross profit margin.

Then, as you grow the business, Ben, I'm curious to hear what you see your clients’ businesses do to that gross profit margin as you grow. When you go from just you to hiring someone out part-time, and this is a really difficult, to be honest, this is a really difficult part of going from zero to like a million—it's going from just you to adding someone part-time to then somehow getting a truck and then adding someone full-time.

Because you can’t scale to a million dollars doing it on your own in most trades. If you're a high-end cabinetry guy, I’ve got a client of mine who does that—he can clear half a million just him, because he’s like an artist.

In pressure washing or painting, that's not artist. The point here is, as you add labor, that gross profit margin—which is like 80%—is a skyrocketed gross profit margin, right? That’s not normal.

So an average business, what do you see—let’s say let’s take a painting company, for example, what should a painting company target for average gross profit margin?

Ben Gavin: Real quick, if you’re in the roofing business, go back and listen to Sam’s episode because he talks about his target gross profit margin at the $22 million mark.

I’m interested to hear your perspective from managing books, pretty much industry-wide, not just repainting. Most home service companies, what I try to tell people to aim for—and we don’t do advisory services; what we do is more just like technicians—but I think of it like 1, 15, 25 when you’re in that zero to 100 or zero to like two or three million range.

It’s a good mark. So, 100% is revenue, 50% gross profit margin, 25% net income. I’d say that because it’s really easy to remember; it’s pretty good for a lot of companies.

If you can do that, my painting clients right now, they’re always shooting between 50-55%—that’s what they try to go to. So, 45% to 55% gross profit margin, but in the way they count it—which I’d be very interested to get in the weeds with Sam. I listened to that episode about how he counts it.

I have a roofing client who does over 40%, but I think we’re counting it differently. Usually how I count this is gross profit is revenue, so sales minus labor and materials and permits and gas—not commissions in marketing. We’ll leave that out for simplicity's sake.

When you’re just getting started, your sales minus the labor money you pay out, minus the marketing or minus the materials you pay out, minus any gas associated with the job, that number should be half of the sales number.

So again, if it's a $1,000 job, a good target when you’re paying other people to do the work is 50%. You need to have that leverage if you want to grow if you have other people do the work. You need to do that at some point.

Austin Gray: I guess you don't have to.

Ben Gavin: But having other people do the work, aim for 50% take home. It’s totally doable; you’ve got to be disciplined about it.

In a lot of services, what you're going to end up doing is—you’ve got a lot of jobs early on because you’re very generous with your price and your time, and now you need to be not as generous.

That’s an uncomfortable thing about growing—you now have to charge more to your aunt’s friend because you have three guys going over in a truck that you’re insuring instead of just you doing it.

That’s a change in mindset that you have to have as you get bigger.

Austin Gray: It really is. And the friends and family thing is a tough one. Go back and listen to Brock Peele's episode—he has a role for doing business with friends and family, and it's still hard to this day. Because as a good community member and as a good person, you want to take care of your people.

But at the same time, you're running a business, and what most people who have never run a business don’t understand is, “Do you realize how expensive it is for me just to get that piece of equipment there? And to turn that thing on, I have to charge you.” You know what I mean? Because otherwise, I'm just bleeding cash on the back end.

One thing I used to do when I was running my first business—I remember this. I was like, "I’ll just do it faster." That’s also a bad idea. Don't just do the job—you need to do it right the first time.

You can flip all these reasonings in your head; just write them down like, “Oh, I can,” and then flip them into the same sales conversations. I could do them faster. “I can’t rush the job, ma’am.” Otherwise we might not do a good job, we’ll have to come back, and you won’t be happy.

So all these different pieces of friction and opportunity—you can use those from a sales perspective. But you can’t crush your own margins because then you run out of money and you're done.

Ben Gavin: Definitely.

Austin Gray: And yeah, so we’re getting a little off track here. I think you gave a great overview of what someone starting out needs to think about.

From Dialed In’s perspective though, if somebody is doing that, “Alright, Hey Ben, I’ve been able to just clear my bank statements, do the reconciliation; I’m doing, let’s say, I’m doing $400k of revenue right now but I need some help here. My time’s being pulled in many different ways. I’m wearing many different hats. I’m doing sales, I’m doing some fulfillment, like I’m still hiring—I just need somebody to help me with this bookkeeping.”

Can you talk about when you take a client at that level—what are some things that you guys handle from the bookkeeping perspective at Dialed In?

Ben Gavin: Yeah, so at that point, you're usually in the spot where you can afford to have someone else do it for the basic reason that you need better usage of your time—you need higher leverage activities for your time.

The things that we’ll typically handle are processing the bank accounts and doing your reconciliations. We do it on a weekly basis pretty much like what I recommended—we do the same thing.

We just have a built-in team with checks and balances and processes to make it extremely reliable. We also provide live reporting, so everyone gets a Google sheet with your numbers that are updating every hour.

You don’t need to check your numbers every hour; I have one client who does that, he’s kind of a crazy dude, but he’s doing a great job in his business.

So the reason we have that setup is that when you do go to look at your numbers, you know they’re accurate and up to date. Right? So at the very basics, we'll just handle the fundamentals well, answer questions, and make sure if anything comes up we can handle it.

Then we'll also clean up usually the last tax year and this tax year as well just to make sure everything's accurate, because there are always a couple things that we need to move around.

But yeah, when you are looking to hire a firm, the things I would look for is if you're at that kind of half a million range—depending on if you have basic needs, or if you need the job cost stuff.

Reliability, just a good reputation, reviews from other people—it's referral heavy service. So if you know someone who does something like you, ask who they use, and if they're happy, you'll probably be happy as well.

The things to really check on are now that you’ve done a little bit of bookkeeping on your own, check when the banks were last reconciled. Every once in a while, check excess transactions in my bank feed—those are the things that you can check very simply just to see if your bookkeeper is keeping up with what you need.

It’s a weird industry where it’s a lot of older members of the workforce who do this, and they’re just overwhelmed with clients—maybe they don’t charge enough, but also they've been around for a long time. Having the up-to-date part of the information is key.

So those are a couple of things I would recommend people look for. Get a referral—that’s always a great way to do it.

And then, you still have your login, so you can check your bank feeds—you can check your reconciliation histories to make sure that things are staying up to date. They should be contacting you when they do those things, but if they don’t, you can always check.

Austin Gray: If you haven’t signed up for the weekly newsletter yet, go to ownrops.com/newsletter, that’s ow n r ops.com/newsletter.

We summarize all the learning lessons from the interviews with the guests on the podcast and we distill those into short actionable tips, tricks, tactics, and strategies that you can use to grow your local service business. Sign up for the newsletter at ownrops.com, that’s ow n r ops.com.

Ben Gavin: What stage of business do you recommend someone who has started as an owner operator start looking to outsource this?

Well, there's two schools of thought on it. One is, you want a professional to handle this for you and you do it when you start, and that’s usually with folks that have a little bit more funding. If you're for your brother in college, he can hack it together himself and should probably learn how to do it and do it for a little while to get the hang of what’s going on.

If you’re doing this on the side and maybe you have a W2 or something else, and you can afford for someone else to do it because your time is really affected, then like month three to six, once things take off, usually people reach out to us if they don’t start right away.

A minimum amount is usually around about a quarter million in trending sales—that's when we get a lot of people reaching out. They say, “This is getting to be more than I can handle, and I want someone a little more reliable who can help me out on it.”

Or, if you have a panicky feeling and you don’t know how anything is going, that’s the other time that you should reach out to a bookkeeper. That’s the second most popular reason people reach out to us—they’re like, “I don’t know what’s happening; I need help.”

So any of those three situations are probably good trigger points to reach out.

Austin Gray: One of the things that was most challenging for me in the beginning, especially as an owner operator, it’s like when you're starting and you're doing sales—you’re helping your field crew, you’re still leading the field crew.

You’re basically going from site visit to booking jobs to back to the field to running a chainsaw or cleaning houses or whatever service you’re offering, to at night or early in the mornings just trying to wrap your head around making sure everything's tightly kept.

When you’re running a million miles an hour, it's like, "Oh crap, I need these materials on this job." So I run to the hardware store or whatever, and I grab these materials, and I’m just going a million miles an hour, right?

Tracking those expenses and tracking the receipts—one of my biggest challenges in the beginning was just because I don’t like to stop. I mean, when I'm in go mode, I’m in go mode.

But I believe it’s something important. What is your recommendation for early-stage owner operators in regard to receipts?

Ben Gavin: I think just a comment on one thing you made—go mode is the default setting for almost all of our clients, so this is a common deal.

Receipts—the IRS rule is that if you get audited, you need documentation for up to seven years, which is a massive pain in the butt.

What I always recommend people do when they get a receipt: take a picture of it on your phone before you put it in your pocket. At minimum, just take a picture of it. That’s the easiest thing to do to start because usually people stuff them in their wallet, and then you come back to it 100 years later—you don’t need to throw those away. You can keep them for a while just in case, but you also have the backup digitally on your phone, which is a really easy way to do it.

That’s a very simple system that anyone can do, so I would just start there. When you get into the area where you need to job cost your information—which is, you need to know your gross profit margin per project—it gets a lot more complicated, especially if you have a big team.

But very simply, if you're just starting, go to Home Depot—they give you the receipt. If they ask for a job name, it’s a good practice to put the job name on there so you can do some napkin math on how much you made on that project.

Take a picture of just the top third because they print it like a foot long; you only need the top third. That’s a pretty easy way to do it.

Austin Gray: Job costing—let's jump into that because this is where it starts to get complicated, and you mentioned it. You want to know how much you made on each job.

So like with your business, you do big, big jobs. You’ve got a huge machine, you’ve got a couple of people, you’ve got big numbers thrown around—you want to know how much you made on that job because it can swing high or low, and if you miss, you miss big, and you don’t want to miss big.

Ben Gavin: I made a second little graph for this, and I won’t go into it as deeply as the last one, but I just want to share with people kind of what things you would need to think about if you wanted to do this on your own—which you absolutely can.

Ben Gavin: Let’s go through each piece. So, revenue—you want to know what revenue in your bank account came from what customer. That’s going to come from your field management system, so you likely have one of these and you can tell where this data came from. You also might have to look at checks that you get from your bank account feed, and you need to turn on in QuickBooks—you get the QuickBooks Plus plan and turn on track income and expenses by customer.

Then you need the field management system to input all your job names so that when you go to your bank feed, you can categorize the check deposits and the credit card deposits by customer. That in itself—that’s how you start with revenue.

The next piece would be for materials in credit card management. This is the most complicated piece.

At a high level, if you have a team, you do not want one person on the team to be coding everyone's receipts. You want every person who spends a dime of your money to be liable for coding the information. So there are a couple tools that you can use to do this that are up here.

If you give someone purchasing power, then they must code it for you—you have to tell them, “If you don’t code your stuff or if it looks sketchy, it’s coming out of your check.” This is super common; I had a client once where one of their staff bought a fishing trip on the company card, and they caught it when they did the reconciliations at the end of the month.

So that’s not fun; I hope it never happens to you. But if you're just starting, an easy way to do material management is to text to confirm purchases for your staff at Home Depot and Lowe's. I can’t recommend that enough. So if they go, they have to text you, and you have to confirm it, and then what happens is that transaction goes to QuickBooks.

You can go into your Home Depot or Lowe’s account, you can see what your tech put as the job name, then you code it to the job through there.

Ben Gavin: Last way is labor and payroll management. So your guys are going to work—let’s say they’re in Jobber, and they’re clocking in and out. Jobber does a great job of tracking, and a lot of these field management systems, they do a great job of tracking labor by job.

Then, when it hits your QuickBooks file, you have to split that up into the projects themselves if you want QuickBooks to be your root of all job costing.

Ben Gavin: What happens is your payroll provider—where you put it in, like Gusto or ADP or whatever—use Gusto, don’t use ADP, please. It’s just much easier to use from everyone's perspective.

So they post a journal entry to your QuickBooks file, showing how much money got pulled out and who it went to. Then you got to cut it up into the different jobs.

Now the one thing people ask me is: “Why don't we just job cost in, in Jobber?” Because we’re already like pulling the job information in there. Everything's already in Jobber, contractor forming or one of these other deals—the reason for that is it goes back to our earlier conversation—it’s because you can’t reconcile any transactions in those systems.

Here’s an example of how this would work: Let’s say that your team is punching in time. This used to happen to me all the time—someone leaves the clock on overnight, and then they punch out in the morning, and then you forget to edit it. Now you edit it manually on a spreadsheet when you go to run payroll because you don’t have time to go edit it in Jobber as well, and then blah, blah, blah.

So over time, if you're not having that field integrity in there, there's no double-check—a reconciliation process for time in there. But when you do it through QuickBooks, you have a number that came out of your bank account, and you can reconcile that against the number of hours per week that people spent on what jobs.

Job costing payroll—we want our little deal on that. This is kind of the map for it; I won’t go through it now.

Ben Gavin: The other thing is for materials, if they're adding in materials to one of these systems, again, they could instead of putting $100, accidentally put $1,000. There’s no way in any of these tools to double-check what was put into the system at a certain time period against what actually occurred in the bank account.

That’s why using a field management system usually, almost every time, has flaws over just job costing through QuickBooks. Now, people will say the next thing: “What about the sync from the field management system to QuickBooks?” They usually suck, is the thing. No offense to all these tools; usually, they suck and they break and it’s a major pain in the butt.

So that’s why when we get into situations where people have a team and they want something job costed, a high majority of the time, we’re doing it out of QuickBooks, and then we’re producing job-costed reporting out of that data.

We need to get information from the credit card management system and from the field management system to be able to code the root data that is double-checked through the reconciliation process out of the bank, and then we produce these job-costed reports.

Final final through there, there are some field management systems that do work and they do a good job, but when they break, it’s an absolute pain to go and fix them. Then you have to reconcile two systems at once instead of just one.

Some field management systems are like, for example, in the insurance claim business, they have one tool that the insurance companies own and that they have to use, so we do it in there for those guys.

But for most people, if you’re under a million bucks, you should do job costing in QuickBooks. Everything else will be inaccurate.

Austin Gray: Okay, so one of the biggest questions I had—because we just implemented a job costing system internally. One of our biggest questions is, where do we log these receipts, these expenses?

So I’m going to ask you that question, then you’ve got a category up here for credit card management—where, and how, how do those expenses get logged? Is it from company credit cards, or like vendor accounts, or subcontractor bills that you’re paying, or all three?

Ben Gavin: Let’s do all the above. Let’s start with credit cards.

So, if a guy has a credit card in their pocket that they can spend money on—our most common and the most robust, but also kind of hardest to use tool is called Expensify.

So what happens is, Expensify is an app on your phone; it’s connected to just your card. If you have an AMX or a Chase card business-wise, you can order a bunch of those for your team, you can put limits on them, you connect that person's card to Expensify, and every time they make a purchase, a new little thing pops up. Bing!

That was your transaction; you need to code it. They have to take a picture of it; they need to add in the customer name, they need to add in the department—that’s optional—and then they need to add in the category of the purchase.

Your team, or usually this is our team, but a client's team will go through and approve in Expensify, which is an additional software on top of QuickBooks. Everything that’s coded correctly, and then you have your outstanding versus your accurately filed transactions per person off the credit card management.

If you’re just starting out, I would really recommend—if you can—Bill Spend. Expense is a great tool; they do a really good job as well.

Clear is newer to us, but the way their system works is the credit card for the user—every time they make a purchase, the user gets a text and there’s a link in the text. They have to click on the link, and then they code everything that way.

So they take a picture, they do the job name, and then they do the categories and potentially the division. So that’s for credit card management.

This one—why it’s most difficult—is that it has the most people you have to train. That’s those darn humans getting in the way.

So that’s why it becomes difficult, but if you have a system, you can have a clear—the main thing you need is you need a reason to have a bite with your credit card users.

So in Expensify, Clear, Ramp, Bill Spend, and Expense, you can see who has not coded their things and how many and how old they are. That’s what you really need when you’re managing a spend system like that.

So that’s credit cards; that's what we do through there.

Ben Gavin: Subcontractor bills—and real quick, that syncs. All those apps sync with QuickBooks?

Austin Gray: Yep.

Ben Gavin: So, Expensify will have its own, so like your bank feed now for your credit card goes into Expensify instead of QuickBooks, and then only approved transactions in Expensify—you click approve and move to QuickBooks—then the approved ones move over to QuickBooks.

Clear works in the same way, so it’s like these are—when you have a credit card management system that you need for your team—all the bank feeds that we talked about at the beginning of the call shoot through this filter, which is the credit card management system, before they hit the final in QuickBooks.

So, that’s where those go and then they will always be the last thing that are ready for close of books and reconciliations, again because of the human involvement piece—people getting behind.

Did that answer your question?

Austin Gray: Yes, it did answer my question, but where my head goes is, “Alright, we just went through this—this is why it’s so pressing.”

Sure, how does that team member categorize that expense to the correct job? So the reason I’m asking this question is because Jobber—we use Jobber for everything.

Our project manager is quoting out of Jobber; the customer is created in Jobber; we’re invoicing out of Jobber, but obviously, QuickBooks is the end-all, be-all.

So what you’re telling me is there is a way for Jobber and QuickBooks to sync every single job with that customer name automatically?

Ben Gavin: Yes, correct. Yep, 100%. In that scenario, the field crew member who is logging the expense from the credit card over here—obviously, they know what job they’re working on—they just have to add the same thing that they see on their Jobber schedule.

Austin Gray: Correct?

Ben Gavin: Yep, and it should be there automatically. So no one needs to keep this up to date.

So, you get a new job in Jobber; it auto ports over to QuickBooks, goes to your credit card management system, and then your guys, when they go buy stuff, they just click on it and they pick the job name and then they keep going.

Austin Gray: Listeners, I want you to—if you're at the stage of "Maybe you guys have already figured this out, but we literally were approaching the million mark internally at our business," and I'm telling you that because I'm telling you that this was a pain up to this point, right?

If you haven’t experienced this pain yet, it’s going to come if your business continues to grow. And I'm asking these questions because Ben, had I asked these questions a month ago, this process—it would have saved me probably 40 hours of my time.

You have so many platforms going on in this day and age running a business—you’re like, “Okay, where’s the end-all, be-all?” The end-all, be-all has to be QuickBooks!

Ben Gavin: Yep.

Austin Gray: Let’s just set the record straight on that. Jobber is so useful in so many different ways; it’s got a great user interface—it’s very user-friendly, right? I highly recommend using it.

Ben Gavin: Yeah, and Jobber, if you're listening to this, yes, we’d take a sponsorship! I feel like I talk about them all the time—I'm like, guys, when are you going to sponsor this?

But no, seriously, whether or not they sponsored or not, I enjoy using Jobber. But the pain that we had was like, “Alright, we’re inputting this stuff in Jobber,” so therefore we need to do all of our job costing in Jobber because that's where the job names live and that’s where our team is consistently getting operations done.

Our backend office operations person is living there, I'm living there—I’m looking at that stuff, right? I do my QuickBooks stuff on Mondays in the mornings, but I'm not there every single day.

But this is gold, so listeners, if you’re listening to what Ben is saying—you can set it up to where everything syncs up, and this will save you a ton of time, I promise you—because I just went through it.

Ben Gavin: The job costing in Jobber—they recently brought that functionality out, and it’s new and they’re working on it.

The same thing I said earlier, though, applies. You can’t reconcile Jobber at all, so like if your team goes in and they fat-finger something into the system, you have nothing to compare that to. Like maybe they did spend $1,000 at Home Depot for that job—I don’t know because I don’t have a bank statement that I could reconcile.

That’s the big thing; I for sure recommend using Jobber for all things operational and field management and whatnot. What ends up—and I think, to your point, Austin—is the end-all, be-all, because of the doubles and triple checks that you can do to make sure the financials are accurate, has to be the QuickBooks data.

You need to go through the data coming from the banks—that’s where it needs to be. Then all the stuff that we have to do in the trades business is to get accurate information on top of it—not everyone has to do this stuff, by the way—this is just home services, construction, and any sort of trade business.

Austin Gray: Yeah, build a software business, right?

Ben Gavin: Yeah, software is like, “Oh, we made money and spent money, and that’s how much we kept.” It’s like, sweet—

Austin Gray: We have bigger problems.

Ben Gavin: Yeah, for sure.

To your point, it is complicated, but this map, I will say, if anyone is going through this right now and they want to handle it themselves from a meta perspective, this is what you need to do. So you need to have different systems to handle different transaction types.

Kind of a pain in the butt to learn—it took us a while to hear from my long-winded story. In the beginning, it took a couple of years to figure out the right way to approach these, but then you get it.

And then you do need to have your other processes in place around how often do I check this, and when do I go reach out to people about when it’s happening, and are we reconciling. If you have—if you get a lot of subcontractor bills, like if you’re in a construction trade, your subs are sending you stuff all the time and you’re under 10 million. Bill.com is a very good option, but then you need to reconcile your payment platforms, which is Bill.com, against QuickBooks to make sure that your accounts payable is the same.

It gets increasingly complex as you get bigger. I won’t go too deep into all that stuff, but it’s tricky. But it’s extremely useful because yes, if you don’t know how much you made on each project—and I don’t know if you’re going through this now around your size, Austin—but if you have a field manager that might be compensated off of profitability and you mess up the profitability, now you have way more problems than just not having the right software.

Now you have an upset foreman who’s not getting comped accurately or if you have to change it in arrears—which I just don’t do. Like, just bite the bullet on it. That's where this becomes extremely, extremely useful because it bleeds into compensation for teams when you build in management layers for your field.

Austin Gray: Absolutely.

And this is the big driving force—obviously, we need to know our numbers, right? But one of the big driving forces is, I have a great project manager on our team, and he handles a little bit of everything right now at our stage.

But you know, one of the things I promised him is I will come up with a comp plan that is incentive-based. But in order to do that, we have to first understand if we’re profitable, if we have enough margin to pay a bonus structure out of that.

Then we need the structure in place so we can set a bonus percentage off of the profitability of each job.

Ben Gavin: Yep, 100%.

And it gets more and more intertwined—if you have multiple people and then you have to get the commissions based on per person, and everyone has different hiring rates and whatnot—you have to have it airtight when you get bigger.

In big construction, if you’re doing like $40, $50, $60, $100, a couple of hundred million dollars, that’s where everyone’s comp comes from. Anyone in a managerial role—that’s where their biggest lever is job profitability.

Austin Gray: Look, listeners! We’re over the hour mark here, so we’re going to start wrapping it up, Ben.

This has been incredibly helpful. I wish I would have had this episode 60 to 90 days ago because I would have been way better prepared for putting this job costing report together.

So listeners, I will continually come back to this. I’m bringing on people like Ben to add value to your business journey, and I promise you, if you’re not there yet, this can be a complex thing. It’s totally manageable, but like you just heard Ben, he spent a couple of years figuring out the best way to do it.

I spent a significant portion of my time over the last month implementing a job costing structure, and it was painful. There was just no way around that. And it was painful for multiple people because I didn’t have a great process, and I look back on that and I think, “I could have led that project so much better had I had a better process in place.”

If you are approaching the standpoint of where you want to implement job costing, go back and listen to this episode. Ultimately, I’m doing my best to bring on people like Ben who are trusted partners in this, who I would actually recommend people working with. I met Ben a couple of years ago; like what would you say—you're at like 40, 45, or 50 clients now?

Ben Gavin: 54 now.

Austin Gray: That’s awesome! So like, whatever they’re doing is working because they wouldn’t be growing. I think I talked to you when you were at like your first two or three clients.

We’ve doubled every year. So we’re going to double again; we’ll be at 100 by the Fourth of July next year.

Ben Gavin: That's incredible!

Austin Gray: So whatever they’re doing is working. If you’re at the point where you want someone who has spent a lot of time and effort into this, I think you can tell from going back and watching that presentation you put together—and they’re doing good work at Dialed In.

Yeah, that’s just a shameless plug for you, Ben, but I appreciate it.

Ben Gavin: I’m realizing I look like a guy in the pitch black for context for people. I had to go out to the garage because my two kids were waking up, and my office is right off the kitchen.

But I appreciate the plug. It's a complicated thing. I had to figure it out myself, and now we can just help people do it faster and have them support it. So we love doing it, it’s fun.

Austin Gray: Where can people find Dialed In?

Ben Gavin: DialedInBookkeeping.com, and @DIBookkeeping on X. Those are pretty much the two places we are at right now. I don’t post as much as I’d like to because we’ve got a lot of work going on and we’ve got the kids, but hopefully, we’ll be getting back to doing more of that, sharing and teaching, as the year wraps up here.

Austin Gray: Very cool. Well, Ben, thanks so much for being on the show. Is there anything else that you’d like to share with listeners?

Ben Gavin: It’s November 1st—on January 1st, that’s the end of the year, and the tax season begins. So if you are growing your business, your CPA, who will be your tax advisor (which is not what we do) will be really happy if you reach out to them before January 1 so that you can be ready, and they can help get your stuff ready super fast.

Just from our industry perspective, we’re all starting to gear up for what’s called the busy season based on taxes.

If you’re kind of on the fence about, “I’ll do this later,” you’ll get a better experience from your service providers if you do it now instead of in January, because we will all be maxed out and busy in January.

That’s the only thing I’d recommend to people. It’s a required thing; you have to do it. It’s better to do it now; you’ll get a better experience. But besides that, awesome! Thank you for having me on; I love the podcast, and I look forward to keep following along.

Austin Gray: That’s great! Well, thanks again, Ben. We do appreciate your time.

And listeners, thanks again for listening to another episode of the OWNR OPS podcast, where we distill tips, tactics, and strategies about building local service businesses.

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We’re going to wrap this episode up. We’ll see you guys next week. Don’t forget: work hard, do your best, and never settle for less.

See you guys next week!