Whether you run an HVAC, plumbing, electrical, janitorial, or any other field service business, it is important to know and understand the 5 types of accounting required for success. The most successful business owners know these numbers and are empowered with the knowledge to make sound business decisions. If you’re not a numbers person, that’s ok. You just need to have someone on your team that does.
To keep an eye on your company’s financial performance, you use Managerial Accounting on an accrual basis. This system is what makes up your income statement, balance sheet, cashflow statement, KPIS, and dashboards.
There are many other accounting specialties. Businesses use five main types: managerial, cost, project, tax, and financial accounting.
Managerial accounting provides the reporting, analysis, and interpretation of financial data that decision-makers need to create and refine business strategy. Managerial accountants support planning by performing cost-volume-profit analysis, weigh in on organizational structure and analyze variances.
Cost accounting, a specialty within managerial accounting, is focused on how much a business spends to create its products, including labor and supply costs. The information gleaned from cost accounting is used to optimize operations—to value inventory, set selling prices for products and create budgets for similar projects.
Tax accounting, which is governed by the U.S. Internal Revenue Code, deals with preparing tax returns and making tax payments. Accountants ensure that companies comply with complex and changing laws.
Professionals such as project managers and accountants use project accounting to integrate key financial tasks on a project-by-project basis and report their progress and success to management.
Project managers rely on project accounting to inform them of the status of direct costs, overhead costs and any revenues in a specific project. Project accountants generate these figures in financial reports. A project manager uses these reports to determine if they need to adjust the project’s budget and work breakdown structure (WBS).
This discipline focuses on providing information to outside parties interested in the business. A financial accountant typically prepares balance sheets, income statements and cash flow statements to help investors understand the company’s performance or to make a case to a bank to loan money to the business.
Ensure the software you use provides the required reports to support each of the 5 accounting types referenced above. If you’re not sure, contact your software provider and/or your accountant for assistance to ensure you are doing everything you can to be successful.