Should I keep my fab shop’s scrap metal income separate when I sell?

A buyer studying your fab shop wants to know what the business earns from making things for customers. Scrap sales muddy that picture. If they are folded into job revenue, or quietly netted against material costs, the shop can look better or worse than it is, depending on what the scrap market was doing that year.

Ask your bookkeeper how scrap is recorded today. If it is mixed into several accounts, ask whether it can be pulled out for the past few periods. Keep the buyer’s likely questions in mind: how much material becomes scrap, who hauls it away, whether the payment arrives as cash or cheque, and whether it all reaches the books.

Be careful with cash that never reached the books. Unrecorded scrap income is hard for a buyer to rely on and can make them doubt the rest of your numbers. Your accountant can tell you how to present it properly. A clear separate line also shows a buyer something useful: how efficiently your shop uses its material. Expect a buyer to ask what scrap income looked like in a slow year and a busy year. Having the answer ready, with the supporting statements from the hauler, shows the shop keeps careful records.

Key takeaways

• Show scrap income on its own line, apart from job revenue.
• Make sure every scrap payment reaches the books.
• Ask your accountant how to present it for the sale.