ATO benchmarks for commercial cleaners

The ATO calls this industry building and other industrial cleaning, and its group cleans shops, offices, high-rise towers, factory buildings and schools, as well as roads. For this industry the ATO names total expenses against turnover as the key range, the one it holds to track turnover most closely for cleaners.

Membership comes from the main activity a business reports. The ATO keeps out the very smallest and very largest operators by turnover, those reporting multiple activities and those with less than a full year of trading before the year started, and removes results standing far apart from the rest.

Turnover is cleaning income from contracts and one-off jobs, excluding GST. Total expenses covers every cost the business reports, less payments to associated persons, relatives included.

The ATO also lists a labour ratio for this industry among its other ratios, alongside motor vehicle costs. Labour there means wages plus contractor and subcontractor costs, less payments to associated persons. All of those costs sit inside total expenses too, along with cleaning products, uniforms, equipment leases and repairs, fuel and tolls, scheduling software and insurance. A firm that subcontracts most of its buildings and one that employs its own cleaners both carry that labour in total expenses, so the choice between them does not change which figure the cost lands in.

Cost of sales has no published ratio for this industry. The ATO publishes a ratio only when enough of the industry reports the expense and the figures pass its statistical tests, and many businesses selling a service have little cost of sales. Where a cleaning firm does report some, the ATO's version excludes salary and wages.

Each band holds a slice of cleaning businesses bunched near the industry's mean result for that turnover range, so it marks neither a pass mark nor an upper limit, and its ends are rounded to whole numbers. The turnover ranges are fitted to this industry's own spread of results.

The expense share rises steeply with size: both ends of the band move up from the lowest turnover range to the highest in both years. The lowest and middle bands are wide and overlap each other, while the top band is much narrower. In 2023-24 the top band begins exactly where the middle band ends.

Set against 2022-23, the 2023-24 figures are lower at every end bar the middle band's upper end, which held. The lowest and top bands each moved down at both ends, and the middle band's lower end dropped, leaving that band slightly wider.

From the ATO's list of causes for a high ratio, the ones that suit cleaning include staff costs heavy for the contracts held, such as more cleaners rostered on a building than its contract price carries, and a low mark-up on contracts priced tightly. Paying more than competitors for chemicals and consumables, or losing product to spills and overuse, adds cost too. Income left out of the books, such as a one-off job paid in cash, lifts the ratio as well.

A low ratio may mean costs went unrecorded, and the ATO names cash wages as an example, or it may reflect stronger pricing or a leaner business.

Rule out the recording causes first by confirming:

• every subcontractor and supplier bill entered
• the buildings serviced during the year compared with the invoices raised
• bank deposits traced to the invoices they settle
• wages paid in cash written up in the books

Using a complete financial year from the profit and loss, divide total expenses, net of payments to associated persons, by turnover excluding GST, then set the result beside the band for the business's turnover range.

A part year, a first year in business or a year with an unusual one-off expense can read differently, because the ATO's group excludes new businesses and extreme results. A firm that also cleans carpets or homes as its own line may be reporting multiple activities, which the ATO leaves out too. And because the lowest and middle bands overlap, the same ratio can fall inside both, so getting the turnover range right comes before reading the result.