As the summer heat peaks, your HVAC business is in the midst of a storm—installations, repairs, and maintenance are all in full swing. Your teams are scattered across the area, and your phone is a constant buzz of new requests. Invoices are piling up on your desk, and just when you think it couldn't get any busier, your technicians urgently request a costly replacement part for a customer’s AC unit. The delay in acquiring this part could potentially disrupt your business operations. Despite the need for proactive expense management, time is a luxury you can't afford.

Later that week, as you finally carve out a moment to scrutinize your expenses, a chilling realization strikes: several customer parts orders were procured at higher-than-usual rates due to a lack of time for cost comparisons. If this scenario hits close to home, rest assured that you're not alone. Navigating expense management amidst a thriving business can feel like a battle. Yet, armed with effective strategies and tools, you can avoid financial pitfalls and find a path to financial stability.

This article explores how HVAC companies can master expense management and unveil practical tips that transform your financial situation. We promise a future where your finances remain as cool and controlled as a well-maintained AC unit. Implementing these expense management strategies will help you build stable and sustainable business practices and save you time and money, allowing you to focus on what you do best—providing top-notch HVAC services.

Understanding Your Business Expenses

Staying on top of your expenses entails more than just grasping your monthly costs; it's about comprehending where every dollar is allocated and its rationale. Here’s how you can achieve this goal:

1. Regularly Review Your Financial Statements

Schedule a monthly review session on your calendar as a recurring event and leverage bookkeeping systems to generate automated reports for expedited reviews. Additionally, compare current financial data with previous years to identify trends and anomalies, allowing adjustments based on these insights.

For instance, if you notice expense spikes due to hiring additional part-time workers or increased spending on equipment maintenance during the summer, analyze the return on investment associated with these decisions and scale them accordingly to optimize resources and maximize profitability as your business grows. Scaling involves strategically adjusting your expenses to accommodate increased demand or changing circumstances, ensuring sustainable growth and success.

2. Categorize Your Expenses

Ensure precise categorization of your expenses, grouping them into categories such as labor, direct materials, or equipment to identify areas prone to budgetary exceedance. Regularly review these categories to ensure they accurately depict your expenses. Analyze the impact of each category on the bottom line, paying particular attention to outliers or one-time significant expenditures. For instance, if you observe increased costs related to company vans for repairs and fuel, allocate a budget for upgrading to newer, more energy-efficient models.

3. Use an Expense Management System to Optimize Costs

In addition to implementing best practices, leveraging technology can elevate your cost management efforts. Manual processes like data entry from receipts and invoices can quickly become overwhelming and are prone to errors. That's where a robust expense management system comes into play, giving you the control and efficiency you need to manage your expenses effectively. Merits of a solid expense management system include:

• Automation of Expense Tracking

Some expense management platforms offer seamless integration with your current accounting systems, eliminating the need for duplicate entries or additional staff training. By simply uploading receipts and invoices, these tools automatically categorize expenses for you. For example, Decimal's expense management solution can categorize costs in real time, leaving no purchase overlooked. Moreover, these systems can automatically import all financial transactions directly from bank feeds and credit card statements.

• Enables Strict Spending Controls and Streamlines Approvals

Expense management solutions can manage detailed spending, budget restrictions, and approval workflows. For instance, Decimal's expense management solution can assign specific spending limits to each employee, reducing the need for constant verification to prevent overspending. This eliminates the risk of expense reports getting lost in email chains and employees having to resubmit receipts. With these features, concerns about unauthorized purchases or delayed reimbursements become a thing of the past.

Five Practical Expense Management Tips to Implement Today

Strategic cost reduction isn't about compromising quality; it's about making intelligent decisions that enhance efficiency while maintaining high standards. Here are some tactics to help you achieve this:

1. Audit Energy Use

High energy consumption is inherent to HVAC operations due to maintenance, equipment testing, and running diagnostics, so managing these expenses effectively is crucial. Electricity can be a significant expense as your HVAC business expands, especially if you start opening more branches and offering more services.

An auditor can evaluate your facilities and recommend improvements in areas such as lighting, insulation, and HVAC systems. Implementing these energy-efficient upgrades can drastically reduce electricity usage, potentially qualifying your business for government rebates that offset the initial investment. Moreover, by tracking your energy costs before and after the audit, you can see the return on investment, showcasing how these upgrades lead to substantial savings and enhanced profitability.

2. Consider Green Equipment/Vehicles

The U.S. Department of Energy (DOE) reports that the average operation and maintenance cost for light-duty all-electric vehicles (EVs) is a mere 3 cents per mile. In stark contrast, gas-fueled fleets incurred significantly higher expenses, leading to a staggering $2.25 per mile in total fleet costs in 2022, according to the American Transportation Research Institute (ATRI), marking a 54% increase from 2021. This data underscores the undeniable efficiency of embracing green alternatives. We recommend researching various manufacturers and suppliers to identify models that promise substantial long-term savings. While doing so, pay close attention to their infrastructure support, including the availability of EV charging stations.

In addition, your business is eligible for the clean vehicle tax credit if you upgrade to EV models. The credit is $7,500 for qualified commercial clean vehicles weighing under 14,000 pounds and $40,000 for all other vehicles.

3. Adopt Preventive Maintenance

According to ATRI, maintenance and repair costs contribute 8-10% of a fleet’s average marginal cost. The more vans or service vehicles you have, the more this cost will add up. A proactive maintenance schedule based on manufacturer recommendations can help HVAC business owners avoid costly emergency repairs and downtime. Utilize software to track equipment performance and streamline maintenance reminders for your team. Additionally, regularly reviewing operational records and costs allows you to assess the effectiveness of your maintenance program and make necessary adjustments to optimize efficiency and reduce expenses.

4. Streamline Inventory

Regularly assessing your inventory practices enables you to adapt swiftly to seasonal demand and changing client preferences. Analyze past service calls to identify frequently demanded parts and materials. This allows you to establish agreements with local suppliers for efficient delivery as needed. Rather than maintaining large stocks on hand, leverage inventory management software to monitor stock levels and automate ordering processes. This ensures you have the proper inventory on hand without tying up excess capital in unnecessary stock.

5. Regularly Negotiate with Suppliers

Regularly reviewing your vendor contracts allows you to explore opportunities for better deals. Propose bulk purchases or long-term contracts to negotiate higher discounts with your current suppliers. Additionally, alternative suppliers should be researched to compare prices and payment terms. Document and periodically monitor contract terms to ensure you are maximizing the proposed savings and maintaining favorable vendor relationships.

Expense Management Can Be a Breeze With Decimal

Every dollar counts when you're running an HVAC business. It's crucial to ensure that your hard-earned money is invested in opportunities rather than wasted on emergencies. At Decimal, we specialize in crafting customized expense management systems tailored to your business's needs and scale. Our tools automate recordkeeping and provide comprehensive insights into expenses, empowering you to make smarter, data-driven decisions.

Are you ready to take control of your business expenses? Schedule a free accounting services consultation meeting with one of our experts today and say goodbye to the stress of overspending.