Financial Basics
& Taxes

Separate Business and Personal Finances

This is the most important financial rule for any contractor: never mix personal and business money. Open a dedicated business checking account and business credit card on day one. Pay yourself a salary or regular drawings. This protects your LLC liability shield, simplifies taxes enormously, and gives you accurate picture of how your business is really doing.

Invoicing and Getting Paid

Cash flow is the lifeblood of a small business. The faster you invoice and collect, the healthier your cash flow.

Best Practices

Invoice immediately - Use a mobile app (ServiceTitan, Housecall Pro, Jobber, or even Square) to create and send invoices from your phone at the job site
Collect at point of service for residential customers - don't leave without payment
Accept cards - Square, Stripe, and Housecall Pro all enable card payments on your phone. Customers who can't pay with cash will pay with a card.
Net 30 terms for commercial accounts - Track accounts receivable carefully. Follow up immediately when invoices are overdue.

Business Deductions for HVAC Contractors

One major advantage of owning a business is the ability to deduct legitimate business expenses. Common HVAC contractor deductions:

Expense Category	What's Deductible
Vehicle	Actual expenses (fuel, insurance, repairs, depreciation) OR standard mileage rate (67?/mile in 2024) - track every business mile
Tools and equipment	100% first-year deduction under Section 179 for most equipment (no depreciation schedule required)
Parts and materials	Cost of all materials used in completing jobs
Insurance premiums	General liability, commercial auto, workers comp, health insurance for self-employed
Marketing	Google ads, website costs, business cards, door hangers, vehicle wrap
Software subscriptions	QuickBooks, Housecall Pro, scheduling software, Google Workspace
Education and training	NATE exam fees, continuing education, trade publications, this course!
Phone and internet	Business portion of your phone plan; internet if used for business
Home office	If you have a dedicated workspace at home, a portion of home expenses may be deductible (consult a CPA)

? Hire a CPA

Tax law is complex and changes frequently. Invest $500-$1,500/year in a CPA who specializes in small business or contractor clients. A good CPA will save you far more than they cost - and protect you from expensive mistakes with the IRS. This is not an area to DIY.

Quarterly Estimated Taxes

Self-employed individuals do not have taxes withheld from their income. Instead, you must pay estimated quarterly taxes four times per year:

Quarter	Income Period	Due Date
Q1	January 1 - March 31	April 15
Q2	April 1 - May 31	June 15
Q3	June 1 - August 31	September 15
Q4	September 1 - December 31	January 15 (following year)

A simple rule: set aside 25-30% of every payment you receive in a separate savings account for taxes. When quarterly payments are due, you'll have the money. Nothing derails a new business faster than a surprise tax bill in April.

Key Financial Metrics to Track Monthly

Revenue - Total invoiced. Separate service revenue from equipment sales.
Cost of Goods Sold (COGS) - Parts and materials used. Revenue minus COGS = Gross Profit.
Gross Profit Margin - Gross Profit ? Revenue. Healthy HVAC: 45-60%.
Net Profit - What's left after all expenses. Target: 15-25% of revenue.
Accounts Receivable - Money owed to you. Track aging - anything over 60 days needs active collection.
Average ticket - Average invoice value. Measure this monthly and look for ways to increase it (through upselling, maintenance agreements, quality parts).

? Module 5 Take the Full 40-Question Exam ?