Why should contractors keep good business records?

Keeping good business records is essential for contractors as it allows them to effectively determine the profitability of their business. By maintaining detailed financial records, contractors can track income, expenses, and overall financial health. This understanding is crucial for making informed decisions about pricing, budgeting for future projects, and identifying areas where cost reductions can be implemented.

In contrast to the other options, which may also hold some level of importance, the ability to assess profitability directly impacts the contractor's ability to sustain operations and plan for growth. While recording expenses may also be necessary for insurance purposes or in the event of an IRS audit, and monitoring costs over time can aid in financial planning, these factors serve secondary roles in the broader context of evaluating and ensuring the overall profitability of the contractor's business.