Financial statements for Ottawa consultants and government suppliers

One-owner Ottawa corporations: bookkeeping, payroll and financial statements with the T2 from $500 to $700 a month. Filings: the T2, Schedule 1, Schedule 50, CCA, the small business deduction, T4 or T5 slips and instalments.

Unbilled time at the year-end date

Task authorization work is billed in arrears, and approval can trail by weeks, so at year-end there is almost always recoverable time not yet invoiced. Under accrual accounting that is revenue and a receivable at that date.

Where the corporation subcontracts individuals, their cost is accrued in the same period, even if their invoice arrives later. Recording cost and revenue in different periods is the most common distortion on a consulting year end, and makes year-to-year comparison unreliable.

Firm-price and time-based work behave differently

Time-and-materials revenue follows the timesheet. Firm-fixed-price or milestone revenue depends on how much of the deliverable is done at year-end, which is an estimate, not a record.

A corporation running both keeps them separate in the ledger. Extra effort on a fixed-price engagement does not add revenue, and a foreseeable overall loss is recognized at once, not spread across the remaining milestones.

Concentration, prime contractors and the payment chain

Public-sector consulting revenue is often concentrated in a few contracting authorities, and often arrives through a prime contractor. Both facts belong in the statements; concentration in one customer or contract is central to reading the business.

Working through a prime also lengthens the payment chain: the prime is paid first, then the subcontractor, so receivable days stretch even with a reliable payer. The business is profitable on paper and short of cash. Receivable aging explains the gap.

Personal services business exposure

A corporation whose work looks like employment — one client, integrated into their team, working set hours under direction, with no other engagements — may be treated as a personal services business. The consequences are severe: the small business deduction is unavailable. A higher rate of tax applies, and most ordinary business expenses become non-deductible.

This is not primarily a statement presentation issue. It belongs in the year-end conversation because the year end is when the pattern becomes visible: a single revenue source, one worker, minimal other costs. Spotting the exposure while there is still time to restructure engagements is far more useful than confirming it after an assessment. The personal services business guide sets out the tests.

Vacation, bench time and liabilities that accrue quietly

Where the corporation employs consultants rather than engaging them as contractors, vacation earned but not taken at the year-end date is a liability, as is any unpaid statutory entitlement. Neither appears unless someone calculates it, and both are genuine obligations rather than accounting formalities.

Bench time — paid staff between assignments — is the other item that shows up at year end, as an expense with no matching revenue. The statements cannot smooth it away, and seeing it clearly is the point. A consulting corporation that cannot quantify its bench cost cannot price its rate card properly. See the vacation pay rules for the entitlement side.

What a compilation gives you, and when to ask for more

A CSRS 4200 compilation engagement presents information the corporation supplies, without verification or opinion; it is not an audit or a review, and a notice says so. It usually suits an owner-managed consulting corporation.

The cases needing more are predictable. Some prime contractors vet subcontractor financial capacity before awarding significant work. A shareholders’ agreement may require it where there are several owners. A buyer of the practice will want assurance over revenue recognition judgements a compilation does not examine. Settle any of these before the year end.

Ontario filings and how the engagement runs

Ontario corporate income tax is administered federally for most corporations. So an Ontario consulting corporation files the federal T2 with the provincial tax calculated inside it, alongside the annual corporate information return. The Ontario tax facts page covers the current rates.

EverStone is a sole practitioner CPA firm with no Ottawa office. Engagements run entirely remotely through secure document exchange, video calls and electronic signature. This suits incorporated management, technical and IT consultants, engineering and policy advisory corporations, and independent professionals contracting into the public sector. Related pages: the Ottawa small-business CPA page and Ottawa consultant accounting.

For the forward-looking side — pipeline and renewal risk, bench cost, prime versus subcontract economics. See fractional CFO support for Ottawa consultancies and government suppliers.

Remote financial statement work

EverStone is a fully virtual, one-CPA firm serving Ottawa clients online. There is no Ottawa office and no local staff. Meetings are by video or phone and documents move by secure email and e-signature. Statements come from records reviewed through the year, not assembled afterwards, which keeps the engagement short.

An owner’s corporate and personal returns are decided together, and personal tax in Ottawa is the other half.

The year end this all feeds into is corporate returns for Ottawa owners.

None of this works on records that are behind, which is what bookkeeping in Ottawa keeps current.

Where a lender or an agreement calls for assurance rather than a compilation, the next question is getting the file ready before the auditor starts.