Bookkeeping for Tradies: The Complete Guide

Why Bookkeeping Matters for Tradies

You did not become a plumber, electrician, or builder to do data entry. But here is the reality: poor bookkeeping is the number one reason trade businesses fail financially. Not lack of work - lack of knowing where the money goes.

Good bookkeeping tells you:

• Whether each job actually made a profit
• How much you owe the ATO for GST
• Whether you can afford to buy that new ute
• What to quote for the next job based on real costs

Setting Up Your Accounts

Choose the Right Software

Xero is the most popular choice for Australian tradies because it works on your phone, connects to your bank, and your accountant can access it directly. The Starter plan at $29/month covers most sole traders.

Essential Chart of Accounts for Tradies

Keep it simple. You do not need 50 categories. Here are the ones that matter:

Income:

• Labour Income
• Materials Income (if you mark up materials)
• Call-out Fees

Expenses:

• Materials and Supplies
• Subcontractor Payments
• Vehicle Expenses (fuel, rego, insurance, maintenance)
• Tools and Equipment
• Insurance (public liability, professional indemnity, income protection)
• Phone and Communication
• Licencing and Training
• Workwear and PPE

Separate Business and Personal

This is the single biggest mistake tradies make. Get a dedicated business bank account and business credit card. Run ALL business expenses through these accounts. It makes GST tracking, BAS lodgement, and tax deductions infinitely easier.

Daily Habits That Save Hours Later

Photograph Every Receipt

Use the Xero app on your phone. Buy materials at Bunnings? Photograph the receipt in the car park before you drive to site. Fill up the ute? Snap the receipt at the pump.

Set a rule: no receipt leaves your hand without being photographed. This takes 10 seconds per receipt and saves hours at BAS time.

Record Cash Payments

If you pay a labourer or supplier in cash, record it immediately. Cash payments are easy to forget and impossible to reconstruct months later. The ATO takes a dim view of unexplained cash payments.

Track Your Kilometres

If you use your vehicle for work, track your business kilometres. The ATO allows you to claim 85 cents per kilometre (up to 5,000km) or use the logbook method for higher claims. A simple app on your phone records this automatically.

Job Costing: Know Your Real Numbers

Job costing is where most tradies fall down. You quote $2,500 for a bathroom renovation, but do you actually know if you made money?

Track Costs Per Job

For each job, record:

• Labour hours (your time and any employees or subcontractors)
• Materials purchased specifically for that job
• Travel to and from the job
• Equipment hire if applicable
• Waste disposal costs

Calculate Your True Hourly Rate

Many tradies charge $80-120 per hour but forget to account for:

• Time spent quoting (you do not get paid for quotes that do not convert)
• Travel time between jobs
• Admin time (invoicing, bookkeeping, phone calls)
• Downtime due to weather, materials delays, or callbacks

Your "productive" hours might be 25-30 per week, not 40. If you earn $100/hour for 25 hours but have overhead of $1,000/week, your true hourly rate is closer to $60.

Review Job Profitability Monthly

Run a report showing income and expenses per job. You might discover that small call-out jobs are actually more profitable per hour than large renovation projects, or that certain types of work consistently cost more than you quote.

GST and BAS for Tradies

GST on Everything

If you are registered for GST (mandatory if turnover exceeds $75,000), you charge 10% GST on your invoices and claim GST credits on your business purchases.

Common mistake: forgetting to include GST on materials you supply. If you buy $500 worth of pipe fittings and bill the customer $700 for materials, you owe GST on the full $700.

BAS Lodgement

Lodge quarterly using the cash basis. The due dates are:

• Q1 (Jul-Sep): 28 October
• Q2 (Oct-Dec): 28 February
• Q3 (Jan-Mar): 28 April
• Q4 (Apr-Jun): 28 July

The BAS Process

1. Ensure all bank transactions are reconciled and categorised for the quarter
2. Check that every transaction has the correct GST code
3. Generate your BAS report in Xero
4. Review the GST collected vs GST paid figures
5. Lodge through your accountant or directly through Xero
6. Pay the net amount by the due date

With automated categorisation from a tool like SortBooks, the GST codes are applied automatically and your BAS preparation takes 15 minutes instead of hours.

Subcontractor Management

Taxable Payments Annual Report (TPAR)

If you pay subcontractors for building, cleaning, courier, IT, or security services, you must lodge a Taxable Payments Annual Report with the ATO. This reports the total amount paid to each subcontractor during the financial year.

What to Record

For each subcontractor payment, keep:

• Their ABN
• Total payments for the financial year (including GST)
• Total GST included in those payments

Verify ABNs

Always verify a subcontractor's ABN before paying them. If they do not have a valid ABN, you must withhold 47% of the payment and send it to the ATO.

Tax Deductions Tradies Miss

• Tools and equipment under $300 - Immediately deductible
• Protective clothing (high-vis, steel caps, hard hats) - Fully deductible
• Laundry of work clothing - Claim up to $150 without receipts
• Union and association fees - Fully deductible
• Training and licences - Related to your current trade
• Home office - If you do admin, quoting, or bookkeeping from home
• Mobile phone - Business use percentage
• Income protection insurance - Tax deductible for sole traders

The Automated Tradies Setup

The ideal bookkeeping setup for a tradie:

1. Xero connected to your business bank account
2. SortBooks for automated transaction categorisation
3. Xero mobile app for receipt capture on site
4. Automatic bank feeds so transactions appear daily
5. Quarterly accountant review before each BAS lodgement

Total time on bookkeeping: 30 minutes per week for receipt capture, 15 minutes quarterly for BAS review.

That leaves you free to do what you do best - the actual work.