Before you touch expense categories, set up your income accounts correctly. If you do both residential and commercial cleaning, create separate income accounts for each. Residential jobs tend to have higher margins but are smaller and paid immediately. Commercial contracts have thinner margins but provide steady recurring revenue with net-30 or net-60 billing cycles. Lumping them together hides which side of the business is actually profitable.

Now for expenses. The biggest distinction most cleaning business owners miss is the difference between cost of goods sold and operating expenses. Cleaning supplies and chemicals go under COGS because they’re directly tied to delivering the service. Everything else is an operating expense. Getting this right gives you a gross profit number that actually means something.

Here are the categories you should set up:

Cost of Goods Sold: Cleaning supplies and chemicals. Paper products, trash bags, and disposable items used on jobs. Anything consumed in the process of delivering the service.

Labor and Payroll: This is usually your largest operating expense. Wages, employer payroll taxes, and workers’ comp. If you use subcontractors, give them their own category so you can track that cost separately from employee labor.

Vehicle Expenses: Gas, maintenance, registration, and auto insurance for company vehicles. If employees use personal vehicles and you reimburse mileage, track that here too. For most cleaning companies running crews across Phoenix, vehicle costs add up fast.

Equipment Maintenance and Replacement: Vacuum repairs, buffer maintenance, carpet extractor parts. Small equipment purchases that don’t need to be depreciated. If you buy a $3,000 floor machine, your accountant may want to capitalize that instead of expensing it, but day-to-day repairs and replacement parts belong here.

Insurance: General liability and bonding are non-negotiable in this industry. Keep them in their own category rather than burying them in a generic “insurance” line. You want to see exactly what you’re paying because these premiums can jump year to year.

Marketing and Advertising: Website costs, Google ads, door hangers, vehicle wraps, referral incentives. Track this separately from other expenses so you can evaluate what’s actually generating new clients.

Uniforms: Shirts, pants, shoes, branded gear for your crew. It’s a real expense that adds up across a team and it’s fully deductible.

Licensing and Permits: Arizona business licenses, ROC licensing if applicable, any city-specific permits. These are easy to forget at tax time if they don’t have their own category.

Phone and Communication: Cell phone plans, answering services, scheduling software. If you’re paying for a CRM or dispatch tool, it fits here or under a software/technology category.

Office and Administrative: QuickBooks subscription, office supplies, postage, bank fees. The catch-all for running the business side of things.

You don’t need 50 categories. You need enough to see where your money goes without so many that you spend all your time deciding where to code things. Ten to twelve well-chosen categories will give you the visibility you need to manage costs and make better decisions.

The real value of setting this up properly shows up when you pull a profit and loss report and can immediately see that your supply costs jumped 15% or your vehicle expenses are eating into margins. That kind of clarity is what separates cleaning businesses that grow from ones that stay stuck. It’s the same principle behind construction job costing in Phoenix, just applied to a different industry. Know where your money goes and you can control it.