Guides
Cash flow for an electrical contractor business: the books an owner has to keep
The books an electrical contractor keeps decide whether the month closes clean: job costing, WIP, holdback, payroll burden and permit records.
What to take away
- Keep a job cost ledger that codes material, labor hours, subcontract, equipment and permits to a job number. One lumped expense account hides which jobs lose money.
- Track work in progress and retainage on separate schedules. An invoice you cannot collect yet is not cash.
- Build payroll burden and overhead into the rate you quote. Burden typically adds 20 to 35 percent to gross wages.
- Reconcile on a calendarweekly job costs, monthly ledger to bank, quarterly estimates, annual filings.
This covers records a United States electrical contractor needs to manage cash flow, with Canada labeled as a second market. It is not tax, legal or safety advice. Confirm rules with the IRS, your state agencies and an accountant who works with contractors.
[figure 1]
The books an owner keeps
- Chart of accounts
- General ledger and trial balance
- Job cost ledger
- WIP schedule
- Holdback register
The ledgers and registers, by name
An electrical contractor's books are a set of records, not one ledger. Each record answers a different question, and each is created by a step in a job.
The chart of accounts is the spine. Number it 1000s assets, 2000s liabilities, 3000s equity, 4000s revenue, 5000s direct job costs, 6000s overhead.
Name the accounts you will actually use: 1200 accounts receivable, 1400 work in progress, 2200 retainage payable, 2300 payroll liabilities, 5000 job materials, 5100 direct labor, 5200 subcontract, 5400 permits and fees.
The ledgers and registers
| Record | Question it answers | Cash flow effect |
|---|---|---|
| General ledger and trial balance | Do debits equal credits? | Catches posting errors before filing |
| Job cost ledger | Did this job make money? | Shows margin before the bank does |
| Work in progress schedule | What is earned but not billed? | Exposes billing lag |
| Retainage register | When is withheld money released? | Delays cash by weeks or months |
| Payroll register and burden worksheet | What does one field hour cost? | Sets the rate you quote |
| Accounts receivable aging | Who owes us, and how late? | Predicts next month's deposits |
| Accounts payable schedule | What is due, and when? | Protects trade credit terms |
| Permit and inspection file | Can the job close? | Final payment depends on it |
| Contract and change order file | What was agreed, and for how much? | Supports invoices and claims |
| Warranty and callback log | What did callbacks cost? | Prices future labor warranties |
Retainage is money a general contractor or owner withholds until closeout. Track it by job, by payer and by statutory release date. Skip that register and you will price new work against cash you cannot spend.
[figure 2]
Records and cash flow
Record
- Chart of accounts
- Costs sorted correctly?
- Job cost ledger
- Did this job make money?
- WIP schedule
- Earned but not billed?
- Holdback register
- When does withheld money release?
- AR aging
- Who owes us, and how late?
What it answers
- Chart of accounts
- Keeps job costs out of overhead
- Job cost ledger
- Shows margin before bank
- WIP schedule
- Reveals billing lag
- Holdback register
- Timing gap of weeks or months
- AR aging
- Predicts next month's cash
Cash flow effect
- Chart of accounts
- Job cost ledger
- WIP schedule
- Holdback register
- AR aging
For the warranty side, warranty callback costs shows what a failed device or a bad splice really costs once the crew has left.
Example: rebuilding a charge-out rate
Illustrative figures follow. Swap in your own payroll data.
- Journeyperson wage $34 an hour.
- Payroll burden at 28 percent, inside the typical 20 to 35 percent range.
- Fully loaded cost $43.52 per paid hour.
- Paid hours 2,080 a year, billable hours 1,500 in service work.
- Cost per billable hour$43.52 times 1.39, or $60.35.
- Truck, tools, insurance and phone $15 per billable hour, so $75.35.
- Target gross margin 25 percent: $75.35 divided by 0.75, or $100.47 an hour.
Low billable hours is what pushes the rate up, not the wage. At 1,200 billable hours instead of 1,500, the same job needs roughly $120 an hour. The Bureau of Labor Statistics wage data for electricians gives a state and metro starting wage instead of a guess.
Documents that carry each record
Most records start as a document someone signs or hands over. Give each step an owner.
- Site assessment sheet completed on the walk-through, used as the estimate basis.
- Estimate carrying a job number before any material moves.
- Signed contract with scope, exclusions and payment terms.
- Job-numbered purchase order for every supplier ticket and subcontract.
- Permit application, inspection result and sign-off filed to the job.
- Signed change order before extra work starts; change order pricing examples show how to price the added labor and material.
- Timecards coded to a job and cost code, never to a general labor account.
- Invoice, then a lien or bond notice if payment passes the statutory deadline.
Reconciliation and remittance calendar
| Cadence | Task | Record updated |
|---|---|---|
| Weekly | Post timecards, receipts and supplier tickets to jobs | Job cost ledger |
| Weekly | Review AR aging and chase anything past 45 days | AR aging |
| Monthly | Reconcile bank and credit cards to the ledger | General ledger and trial balance |
| Monthly | Update work in progress and retainage | WIP and retainage registers |
| Each payday | Deposit federal payroll taxes on your lookback schedule | Payroll register |
| Monthly or quarterly | State withholding and unemployment remittances | Payroll liabilities |
| Quarterly | Estimated income tax and sales and use tax returns | Tax file |
| Annually | W-2 and 1099-NEC forms, depreciation, workers compensation audit | Tax file and fixed asset register |
A missed deposit turns a profitable month into penalties and interest. Federally funded jobs add a weekly certified payroll, and the Davis-Bacon certified payroll rules list the forms and wage determinations your office must keep on file.
Retainage and holdback, United States first
On US private work, retainage is commonly 5 to 10 percent of each progress payment, and many states cap it on public projects. The contract and state statute set release timing. A mechanic's lien is the backup when payment stalls, and the Cornell overview of mechanic's liens explains the general deadlines and filing steps.
Canadian holdback is legislated, not negotiated. Ontario's Construction Act sets 10 percent, released 60 days after publication of substantial performance. British Columbia's Builders Lien Act also sets 10 percent, with a lien period of 45 days from completion or 55 days from a certificate of completion.
Where the records live
One system should hold job costing, work in progress and payroll, and the electrical contractor software and KPI guide covers what to check before you buy. The test is reconciliation: job costs to the bank, payroll to the tax filings, retainage to the release schedule. The IRS recordkeeping guidance describes which documents support income, expenses, payroll and assets.
