Landscaping bookkeeping: maintenance, installs and snow

Most landscaping companies are really two or three businesses sharing one name, one set of trucks and one bank account.

There is recurring maintenance — mowing, bed care, seasonal clean-ups — which is route work with thin, steady margins. There is design, install and hardscape, which is project work with lumpy revenue and real margin when it is bid right. And in cold climates there is snow and ice, which is a weather bet dressed up as a service.

Each one earns differently, costs differently and pays on a different schedule. Books that report them as one revenue number cannot tell you which of them is carrying the company — and it is very often not the one the owner thinks.

Split the revenue before anything else

Three income accounts, or three classes, at minimum: maintenance, installation, and snow if you do it. Enhancements and one-off extras sold to maintenance customers are worth separating too, because they are frequently the highest-margin work in the business and invisible when folded into maintenance.

The costs then need to follow the same split. That is where the rest of this guide comes in.

Maintenance: cost per property, per visit

Maintenance profitability lives at the level of the property. A property's cost per visit is the crew hours on site plus the drive to it, at the crew's burdened labor rate, plus fuel and an equipment charge for the mowers and trailer.

Two things usually surprise people when that is worked out properly:

Drive time is often the deciding cost. A well-priced property in the wrong place loses money, because the crew spends more time getting there than working. Route density matters more than the price per cut. The same logic runs through pest control route profitability, which is the same problem in a different trade.

Old contracts drift. A property priced four seasons ago, before wage and fuel increases, can quietly move from profitable to loss-making without anyone deciding it should. The books should let you rank properties by margin once a season.

Prepaid and flat monthly contracts

Many maintenance customers pay a flat monthly amount — twelve equal payments for a season of service that happens in eight or nine months — or pay the season up front.

That means cash and work are out of step. In the spring you are doing more work than you are being paid for that month; in the winter you are being paid for work already done. Recorded purely as cash arrives, the monthly P&L swings in a way that has nothing to do with how the business is performing.

Your tax filing may be on a cash basis, and that is your CPA's call. But for running the business, it is worth tracking how much of the contract you have earned against how much you have collected, so you know what the winter payments are actually covering. A customer who cancels in October after a full season of service has usually been underpaying all year.

Install and hardscape: run it like construction

Install work behaves like any other contracting project: a bid, deposits, materials, sometimes subs, change orders, and a finished job that either made its margin or did not. It needs job costing — every stone, paver, plant and machine rental coded to the job.

Two landscape-specific points:

Plant warranties are a real cost. If you guarantee plants for a season or a year, replacements are coming, and they belong to the original job. Coded as general materials in a later month, they make the install look better than it was and the later month look worse.

Deposits are liabilities, not income, until the work is done. See deposits and progress billing.

Snow: price the weather risk knowingly

Snow contracts come in two broad shapes. Per push or per event pays you when it snows. Seasonal flat rate pays you the same whether it snows twice or thirty times.

A flat-rate contract is a bet on the weather, and it is fine to make it knowingly. What the books need to show is your cost per event — crew, equipment, fuel, salt and material — so that at the end of each winter you can see what the season actually cost against what the contracts paid, and price next year's contracts on evidence rather than on hope. Salt bought in bulk is inventory until it is used, and worth counting.

Equipment is the capital, so cost it

Mowers, trucks, trailers, skid steers and the rest are usually the largest investment a landscaping company makes. Depreciation for tax is your CPA's job. For running the business, each job and each property should carry an equipment charge that reflects what the machine actually costs to own and run — otherwise the equipment-heavy work looks cheaper than it is.

The truck cost per mile calculator and the equipment buy, lease or finance guide are useful for putting numbers on this.

The seasonal cash trough

Payroll swells in spring, revenue peaks in summer, and cold-climate businesses spend part of the year with costs and little coming in. The fix is not complicated but it has to be deliberate: a reserve built in the busy months to carry the quiet ones. The seasonal reserve calculator works out the size from your own figures, and a line of credit is far easier to arrange in July than in January.

Sales tax

Whether landscaping services are taxable, and how materials are treated, varies a great deal from state to state. Some states tax the service, some tax only materials, some distinguish between maintenance and installation. It is worth confirming your state's treatment rather than following what another landscaper does. See sales tax for contractors.

Related

• Construction bookkeeping, step by step
• What you should charge for a service call
• When can you afford another crew member?

General information, not tax advice. Sales tax treatment of landscaping varies by state.