Bookkeeper for Janitorial Companies

How does money come in for a janitorial business?

Most of the money in a janitorial business is a monthly recurring amount. The same contracts get cleaned on the same schedule, and the same invoices go out every month. One-off jobs add a bump on top of that flow, but they are not the spine of the business.

Owners price work in one of three ways, and your books should recognize which one each client uses. The most common is per square foot, which for commercial cleaning typically runs between $0.12 and $0.35 per square foot per month. Others price by time and materials, itemizing hours and supplies on each invoice. Some just set a flat monthly fee for the agreement and invoice that same amount every month.

If you invoice one-off jobs separately, keep them as their own line. Recurring contract revenue and one-off work pay at different margins, and when both sit in a single income account, you cannot tell at the end of the month which one actually made you money.

What are the biggest costs on a janitorial contract?

Labor is the biggest cost, so it is where the books should start. Cleaning labor typically runs between 40 and 60 percent of revenue, and the best-run shops hold the low 40s. The wage is not the full cost either. Payroll taxes, workers' compensation, and the training days for a new cleaner all ride on top of every hour you schedule.

Supplies are the second cost that is easy to undercount. A bottle of disinfectant or a box of vacuum bags is a small line item, but the total comes out to a real sum every month, and it varies by the job. Kitchens and bathrooms take more chemical and more time than a standard office. When supplies sit inside a general overhead line, you cannot see that one contract is using twice as much as another.

The margin question is also worth being honest about. Owners commonly target a net profit of 10 to 28 percent on every dollar of revenue, but the industry average over the last five years has been closer to 6.3 percent. That gap is ordinary to the trade, and it is exactly why the books have to show the margin per contract rather than a single company-wide number.

How do janitorial books most often go wrong?

Three mistakes quietly leak money out of a janitorial business, and they happen in bookkeeping, not on the job. Each one is small, but they stack up quickly across a dozen contracts.

• Unsent invoices. You send out anywhere from dozens to hundreds of client invoices a month, so one can get missed. The cleaning happens, the client expects to pay, and nothing gets issued. The cash just never arrives. It can stay missing for months before a close catches it.
• Mixed revenue streams. Recurring contracts and one-off jobs earn different margins. If all of it lands in one income account, you cannot tell whether the commercial rows are covering their labor or rely on the one-off jobs to keep them afloat.
• Supplies treated as general overhead. When chemicals and vacuum bags go into a bucket of 'other expenses', you cannot see which client or contract actually burns through the supply budget. One site can use twice the product of another site of the same square footage, and nothing flags it.

These three look like separate issues, but they all come from the same gap: there is no monthly review that matches the invoices that should have gone out, the revenue that arrived, and the labor and supplies consumed by each job.

What should I track separately in the books?

The chart of accounts should separate your revenue into three groups: recurring commercial contracts, recurring residential, and one-off jobs. Then it should separate the costs that each job actually uses, so labor and supplies are attached to the contract they come from, not put into one heap.

Each client gets a tag in the books, and each contract gets the same tag every month. The kitchen-and-bath contract gets its own labor and chemical lines, and the office contract gets its own. The one-off construction clean gets its own. It takes a bit to set up, but the first time you need to know whether a price for a client should go up, the answer comes from the books and not from a guess.

You do not need a second accounting system to do this. A basic tag on every invoice is enough, and it works just as well for a three-man crew as it does for a routed operation. The structure is more important than the tool.

Which numbers actually matter for a janitorial business?

The first number to watch is the labor-to-revenue ratio: whatever you actually paid in wages divided by the revenue those hours produced. The best-run shops hold it in the low 40 percent. When it pushes to 55 percent or above, you already used more than half your income on payroll, and every other cost, supplies, insurance, vehicle, has to fit into the rest. People who are paying attention in the trade say the same thing.

The second number is the profit per contract, not the total company profit. A single strong one-off month can hide three losing monthly contracts. When you see the contract numbers, a constant down month from the same client is pretty obvious.

Those two numbers, checked monthly, are what makes the books actually useful. They decide where cash disappears, and they tell you where it is.

How can the books help me decide to hire or drop a client?

Before you take on a contract or issue another of your own, the books give you one and only one meaningful question: will this contract's revenue cover the labor it requires, and then some? If your labor-to-revenue ratio is already at 55 percent, the new contract may just be more work for the same squeeze.

The same question runs the re-hiring decision. When a contract is losing you money or three months in a row, the bookkeeping tells you that in a single line, and your choice narrows to reprice the client or drop them. When a new building comes in, books can tell you whether the labor for that quote fits in your existing ratio or busts it.