Contractor accountant in Kitchener-Waterloo

Holdback, and what it does to the books

Ontario’s Construction Act requires the payer on a construction contract to hold back 10% of the value of the work until the holdback can be released. For the contractor receiving the payment, that amount is earned but not yet collectible, and it belongs in its own receivable, job by job, rather than blended into ordinary accounts receivable. For the same contractor paying its own subtrades, the holdback retained from them is a cost already incurred and a liability to be paid on release. Left untracked, holdback distorts the margin on the job that earned it and makes the bank balance look healthier than it is. The Act also treats money received on a project as held in trust for the subtrades and suppliers who worked on it, which is one more reason to know which dollars belong to which job. Holdbacks in the books works through the entries.

Progress billing, and when HST becomes payable

A progress invoice does not always mean HST is owed on the full invoice that period. For most supplies, HST becomes payable when the consideration is paid or becomes due, whichever comes first. On a construction contract with a holdback, the HST on the held-back portion generally is not payable until the holdback itself is paid or falls due. A contractor who remits HST on the full invoice, holdback included, is paying the government early out of its own cash. One who never picks up the HST when the holdback is released is under-remitting. We match the HST return to the billing schedule and the holdback releases. Ontario’s single 13% HST makes the arithmetic simple; the timing is the part to get right.

The Act’s prompt payment rules run from a proper invoice, and payment deadlines follow from the day it is given. An invoice that is missing what the contract requires can delay the clock, so invoice discipline is a cash-flow matter, not just paperwork.

Subcontractors, T5018s and classification

A business whose main activity is construction reports payments to subcontractors for construction services on T5018 slips, due six months after the end of the reporting period, which can be the calendar year or the fiscal year. The slip needs each subcontractor’s name, address and business number, which is much easier to collect when the sub is set up than in the week before the deadline. The harder question is whether each person is a subcontractor at all. Control, ownership of tools, the ability to hire help and the chance of profit or loss decide it. If the CRA disagrees with the label, the payer owes the CPP and EI that should have been withheld (employee or contractor sets out the tests). The T5018 subcontractor tracker helps keep the list current.

WSIB reaches the owner in construction

Ontario is unusual in extending compulsory WSIB coverage in construction to independent operators, sole proprietors, partners and executive officers, not just employees. Limited exceptions exist, including work done only on a homeowner’s own residence for a homeowner who hires the contractor directly, but most general contractors and trades working on commercial or new-build projects need coverage for the owner too. Before paying a subcontractor, get their WSIB clearance certificate; without it, the hiring contractor can be responsible for premiums the sub did not pay. Payroll for any employees runs alongside, covered on payroll in Kitchener-Waterloo.

Equipment, vehicles and a winter season

Excavators, trailers, pickups and small tools are written off through capital cost allowance, each in its own class, and the purchase date near year-end changes the first-year claim. Vehicles used partly for personal driving need a log to support the business share. Waterloo Region’s winters slow exterior work, so revenue tends to bunch into the building season while instalments arrive on a calendar. A strong year can produce both a large balance owing and an instalment schedule that starts before the next season’s receivables arrive. We model that in the autumn. See corporate tax instalments and the mileage and vehicle log.

Contractors bidding institutional or industrial work in the region are often asked for surety bonds, and the bonding company reads the year-end statements closely: working capital, the work-in-progress schedule, and whether profit on open jobs is being recognised consistently. A job schedule that ties to the ledger, with holdback shown separately, answers most of their questions before they are asked.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• T2 corporate return and year-end financial statements
• Holdback receivable and payable schedules, job by job
• HST filings matched to progress billing and holdback releases
• T5018 subcontractor information returns
• Subcontractor-versus-employee positions documented
• Equipment and vehicle CCA schedules
• Instalments planned around the building season

Fixed fees, fully online

EverStone is an Abbotsford CPA firm and Waterloo Region is three hours ahead, so a question sent from the site at the end of the day is usually answered before the next morning. Everything runs by video, phone and secure upload, which suits a business run from a truck. A typical trades-corporation bundle of bookkeeping, payroll and the year-end T2 with statements is usually $450–$650 a month. See what it costs.

Remote contractor accounting from Abbotsford

Contractor accounting for Kitchener-Waterloo clients is delivered remotely from Abbotsford, British Columbia. There is no Kitchener-Waterloo office and no local team. Meetings are virtual, documents are signed electronically, and you deal with the CPA directly rather than an intake desk. Subcontractor payments, holdbacks and equipment costs are tracked as they happen rather than reconstructed at year end.