It’s a necessity for managing any business, but one few entrepreneurs enjoy – financial bookkeeping! Luckily, maintaining up-to-date financials for your laundromat, laundry service or even chain of laundromats is fairly easy!
My Perspective
My husband, Dave and I bought our first laundromat in 2010 and have since grown our business to a chain of 4 laundromats with a thriving wash-dry-fold & delivery service. From the very beginning, I have overseen all the bookkeeping as our business has grown. Because of this and our consulting platform, other laundromat owners frequently ask me questions regarding how we manage the financial accounting for our business.
Though I do have a bachelor’s degree in accounting and a head for numbers (I’m a former math teacher), today’s accounting software makes it easy for anyone. This, along with the cash-basis transactions of the laundry business, makes maintaining books for our industry even easier than most other business types.
Before I go into my advice for easily maintaining your accounting records, I do have a couple of important factors to note. First, I am not a licensed accounting or tax professional. My advice is based on my own firsthand experiences of maintaining the books for our laundry business. Due to the ever-changing nature of tax laws, we have always used licensed accountants for tax filing purposes. I suggest this to everyone. Second, I am not a licensed attorney. Any statements I share regarding how our business has been set up or the reasonings behind it should not take the place of consulting your own licensed professional.
Being “Cash-Basis”
As mentioned previously, the cash-basis nature of the laundry business simplifies bookkeeping. By “cash-basis“, I’m not referring to the use of cash only transactions (though this is still true for many laundromats), but to the timing of payment receipt. In the laundry business, customers pay for services when received. This means we do not have to worry about keeping track of “receivables” (money owed to us) or dealing with collections.
Additionally, as a primarily service based business, we have little if any “inventory” to keep track of as well. Between this lack of receivables and inventory accounting needed, transactions can be recorded as of the date received of paid making the bookkeeping very similar to balancing a checkbook!
Accounting Software
Though I’m sure there are many great accounting softwares out there, since the beginning, I have used QuickBooks. Originally, I used the desktop version and then switched to the online version several years back.
I highly recommend QuickBooks Online for a couple of reasons:
- Automations – You can easily link to your bank accounts and credit cards to automatically pull the transactions as deposits and expenses. You can also set up “rules” to automatically classify these transactions. For example, anytime I have an expense from “Cleaners Supply“, QuickBooks knows to label that as “Drop-Off Supplies Expense”.
- Shared Access – As mentioned earlier, I maintain the books throughout the year, but use licensed accounting professionals for tax purposes. With QuickBooks Online, I can give them “accounting access” to my account where they can always see transactions in real-time.
- Support – QuickBooks has been around quite a while and they are always adding to the services and automations it provides. In addition to the support provided by the platform, there are a ton of online tutorials specific to Quickbooks for any questions you may have.
Sets of Books
In addition to what software we use, I am often asked about the separation of entities within our business. Remember, if it’s a separate company, it should have its own set of books. Owners often ask about whether they should have a separate set of books for each location. I’ll share how we’ve decided to separate our business, and thereby bookkeeping, but once again, this should be a discussion to have with your attorney and accountant.
Our laundry business is basically composed of 4 LLC’s:
- The Laundromat LLC – All 4 of our locations are in the same LLC. Though some attorneys may advise against this due to a lack of limiting our liability, we decided this was the best choice for our model. Our locations are all within a 15-mile radius and they share both employees and supplies. To split all financial transactions between the 4 locations would require a great deal of additional recordkeeping. I do, however, use the “class” option in Quickbooks to split transactions between our 4 locations. This allows us to more easily assess the financials for a specific location as well as separate them if we were ever to sell a location.
- The Delivery LLC – When we started Pick-up & Delivery in 2016, we were advised to create a separate entity covering all logistics expenses and drivers. How this works accounting-wise is that all Pick-up & Delivery Revenue is deposited into our Laundromat LLC (the company that processes it). A percentage of that Revenue is then paid from the Laundromat LLC to the Delivery LLC as “Delivery Income”. This is its only revenue. The only expenses for the Delivery LLC are those for the drivers’ wages, the cost of the vehicles, vehicle repairs, fuel charges, and vehicle insurance.
- – 4. Commercial Property LLC’s – Of our 4 laundromats, we own the commercial property (standalone buildings) for two of them. As advised by our attorney, those properties are each held by their own LLC and they lease the spaces to our Laundromat LLC. The Laundromat LLC has triple-net leases and covers all expenses for the properties that arise. Basically, accounting-wise, the only revenue for the Commercial Property LLC’s is the rental income from the Laundromat LLC. The only expense for the Commercial Property LLC’s is the mortgage payments.
So, how many separate entities should you create for your business model? There are many factors to consider. Liability-wise, the more you separate them, the less risk you have for substantial loss. However, the more you separate them, the greater number of books you must maintain (along with all the bank accounts and payment cards that go along with them!)
Conclusion
Though this is a extremely brief overview of financial bookkeeping for a laundry business, it’s a topic that I often get asked about. My best advice is to not let the idea of “business accounting” overwhelm you and cause you to immediately run to outsourcing the task. Between the nature of transactions in our industry and the modern advancements in accounting software, it’s some of the easiest “business accounting” you could ever imagine! Additonally, maintaining your own financials is a great way to stay connected to the overall financial health of your business.
