A cleaning company's economics come down to labor hours, travel time, and client retention. Its books should answer three questions: which clients are profitable, whether each crew earns more than it costs, and whether payroll taxes and sales taxes are being handled correctly. Most owners are surprised by the last two.
The classification risk
Cleaning companies frequently pay cleaners as independent contractors. The IRS looks at behavioral control, financial control, and the type of relationship. If you set schedules, assign clients, require specific methods, supply equipment and supplies, and cleaners work for you indefinitely, the facts point toward employment regardless of the paperwork. Misclassification can lead to back payroll taxes, penalties, and unemployment and workers' compensation claims. See W-2 vs 1099 classification.
Payroll specifics
- Track hours by crew and by job, including travel time between sites where it counts as work time under wage and hour rules.
- Overtime, minimum wage, and local wage rules vary by state and city.
- Workers' compensation premiums are usually based on payroll by job class and are subject to audit.
- Employees who receive tips or bonuses need proper reporting.
- Run payroll through a provider and keep deposits current. See small business payroll services.
Revenue and recurring clients
Most cleaning revenue is recurring: weekly, biweekly, or monthly service for residential and commercial accounts. Your books should record billings by client and by service type, handle prepayments and deposits as liabilities until earned, and age unpaid invoices. Commercial clients often pay on terms, so accounts receivable matters. See accounts receivable services.
Supplies, equipment, and vehicles
- Supplies bought regularly are ordinary expenses, but separate bulk purchases and supplies for resale if you sell products.
- Equipment such as vacuums and floor machines is depreciated or expensed depending on cost and current rules.
- Vehicles are a major cost for mobile crews. Track mileage or actual expenses carefully and keep logs. Commuting is not deductible, but travel between job sites generally is.
- Insurance, bonding, and licensing are recurring costs to record by policy period.
Sales tax on cleaning services
In many states, cleaning services are not taxable, but a number of states tax some or all janitorial or building maintenance services, particularly for commercial customers. Texas, Pennsylvania, and New York are examples of states with rules that can reach some cleaning services, while others do not. Rules also vary for supplies you resell. Confirm your state's treatment before assuming. If you operate in more than one state, check each. See sales tax filing services.
Profitability by client and crew
- 1Track revenue per client against labor cost, supplies, and travel.
- 2Compute labor cost as a percentage of revenue by crew.
- 3Review the lowest-margin clients each quarter and reprice or drop them.
- 4Watch churn and the lag between work done and cash received.
Tax filing
A sole proprietor or single-member LLC files Schedule C. A multi-member LLC files a partnership return, and an S corporation files Form 1120-S. Estimated tax payments apply to owners. See Schedule C tax preparation, single-member LLC tax filing, and first-year LLC taxes. Contractor payments need W-9s and, where required, Form 1099-NEC reporting. Reporting thresholds have changed in recent legislation, so confirm the current rule.
A monthly routine for cleaning owners
- Reconcile bank, card, and payment processor accounts.
- Post payroll and confirm tax deposits.
- Review the invoice aging report and follow up on late accounts.
- Review job and crew profitability.
- Set aside money for taxes and sales tax if it applies.
- See the monthly bookkeeping checklist.
Our bookkeeping service and payroll service support cleaning businesses. To discuss your bookkeeping needs, tell us how your cleaners are paid, how many crews you run, and which states you serve.
