Financial Management, Taxes, and Payroll
Cash flow, classification, and compliance
Know the three financial statements - income statement, balance sheet, cash flow statement - and how they differ. Know job costing: direct costs (materials, labor, subs) vs. overhead (insurance, office, vehicles) vs. profit. Know markup vs. margin: markup is added to cost; margin is profit as a percentage of price. A 25% markup is only a 20% margin.
Know worker classification: employees vs. independent contractors, and the consequences of misclassification (back taxes, penalties). Know payroll taxes: FICA (Social Security and Medicare), FUTA, state unemployment, and withholding. Know workers' comp classification codes for roofing and how experience modification rates affect premiums.
Know tax basics: quarterly estimated payments, depreciation of equipment (Section 179 / bonus depreciation where applicable), and sales tax on materials. Know lien and bond basics for protecting receivables.
Traps: confusing markup with margin; treating subs as employees (or vice versa) without applying the classification tests; and forgetting that cash flow - not profit - kills contractors.
Worked example: a job costs $80,000. At 20% markup, price = $96,000; profit = $16,000, which is a 16.7% margin on price. At 20% margin, price = $100,000. Know which one you're quoting.
Rule of thumb: price for margin, manage for cash, and classify workers correctly.