Financial statements for Maple Ridge trades corporations

The work you did in December and invoiced in January

Almost every trades business closes its fiscal year with jobs part-done. Labour has been paid, materials have been bought, and no invoice has gone out. If the statements pick up revenue only when it is billed, that work vanishes: the costs land in one year and the revenue lands in the next, and both years are wrong.

The correction is to accrue the value of work performed but not yet invoiced. It needs only a list of open jobs at the year-end date with the labour and materials in each. Somebody has to make that list at the time: reconstructing it in April from memory produces a number nobody believes.

Customer deposits are a liability, not a good month

A deposit taken for a kitchen that will not start until March is not revenue. It is money held against an obligation to perform, and it belongs on the balance sheet as a liability until the work is done. Recording deposits as income overstates profit, overstates the tax bill in the wrong year, and gives the owner a completely false read on how the business is doing.

It also creates a cash trap. Deposits feel like available money, get spent on the current job, and the obligation still has to be delivered later out of cash that is already gone. Classifying deposits correctly at least makes the position visible.

What the bank is looking at when the line renews

Most small trades corporations are not being underwritten for bonding capacity or covenant tests. They are being looked at once a year by a lender deciding whether to renew an operating line and at what limit. That reader wants three things: whether the business made money, whether it can service the debt it already has, and whether the receivables behind the line are real and collectible.

Receivable aging carries a lot of weight in that assessment. A pool of receivables where a third is over ninety days tells a different story from the same total collected within thirty, and the ninety-day portion is often discounted or excluded entirely from what the line will support. Presenting the aging clearly, and writing off what genuinely will not be collected, is more useful than a flattering total.

Vehicles, tools and the shareholder loan account

Owner-managed trades corporations tend to accumulate two recurring balance sheet issues. The first is vehicles and tools bought personally and used in the business, or bought by the corporation and used personally, without the treatment ever being settled. The second is the shareholder loan account, which absorbs whatever did not fit elsewhere over twelve months.

A shareholder loan in a debit position at year end — money the owner owes the company — carries a real tax consequence if it is not repaid within the required window, and it is one of the more common findings on an owner-managed file. Cleaning it up at year end is straightforward; discovering it two years later is not. See the shareholder loan guide for how the rules apply.

What a compilation does and does not give you

A compilation engagement under CSRS 4200 is the standard product for an owner-managed trades corporation. The accountant assembles and presents the information the business provides, and applies professional judgement to how it is presented, but does not verify it and expresses no opinion or conclusion. The statements carry a notice saying exactly that.

It is not an audit and it is not a review. A review would add limited assurance through enquiry and analysis; an audit would add an opinion supported by testing. For a trades company borrowing on a modest operating line, a compilation is almost always what the lender expects and accepts. It is worth asking the question directly rather than assuming, because a lender who wanted something else and received a compilation will simply come back for it, and by then the year is closed.

Reading your own statements as a management tool

The most underused part of a year end is the conversation about what it says. Gross margin by itself answers whether the work was priced well. Overhead as a percentage of revenue answers whether the business has grown into costs it cannot carry. The gap between profit and the change in the bank balance answers where the money actually went, which for a trades business is usually into receivables, unbilled work, or equipment.

Statements filed without being read are an expensive compliance exercise. A walkthrough with the person who prepared them tends to change at least one decision the following year. That conversation is part of the engagement.

How the engagement works from Abbotsford

EverStone is one CPA, working from a single office in Abbotsford, with no Maple Ridge office. Everything runs remotely: documents through a secure portal, questions by video call, signatures electronic. For a business where the owner is on tools most days, that removes the costliest part of a year end — the day it takes to go and sit in someone’s boardroom.

The work suits incorporated framing, finishing, mechanical and electrical trades, landscaping and site businesses, small manufacturers and the service companies around them. Related pages: the Maple Ridge small-business CPA page and Maple Ridge contractor accounting.

If the year showed a busy year that produced no money, see fractional CFO support for Maple Ridge trades.