Accountant for Maple Ridge manufacturers

Inventory is a tax number, not just a stock number

What you hold at year-end directly affects the year’s profit, because the cost of goods sold is a function of opening stock, purchases and closing stock. Value the closing inventory too high and you overstate profit; too low and you understate it, which is the version that attracts attention. For a Maple Ridge fabricator carrying steel, components and finished units, the count and the valuation basis at year-end are as consequential as anything on the invoice side. Our inventory accounting guide sets out the approaches.

Work in progress: the part that is neither

Production businesses always have value sitting part-finished — material issued, labour applied, nothing yet sold. That is real value and it belongs on the balance sheet rather than being expensed as it is incurred. Shops that expense everything as it is bought understate assets and distort the year, particularly when a large job straddles the year-end. Establishing a consistent WIP basis is one of the higher-value pieces of work in a first year with a new accountant, and it makes every subsequent year easier to close.

Equipment, and the machine you eventually replace

Machinery, tooling and shop fit-out are capital assets recovered through capital cost allowance at rates set by each asset’s class. The half-year rule generally halves the first-year claim, while the Accelerated Investment Incentive suspends that for eligible property and can allow a considerably larger deduction in the year the asset is put to use.

The part shops most often miss is the other end. When a machine is sold or traded, the proceeds are compared against the undepreciated capital cost left in its class, and where more depreciation has been claimed than the machine actually lost in value, the difference returns to income as recapture — fully taxable in the year of sale, trade-in included.

Costing a job properly, before you quote it

The accounting question and the commercial question are the same one here. If material, labour and overhead are not attributed to jobs consistently, the margin you think you are making on a product line is a guess — and quoting off a guess is how a busy year produces a thin result. Getting the costing structure right serves the return and the pricing decision at once, which is unusual and worth taking advantage of.

Sales tax on what you make and what you buy

Manufacturing inputs, machinery and finished goods are not all treated identically under BC’s provincial sales tax, and certain production inputs are treated differently from general purchases. Combined with GST on both sides, a shop can be paying tax it need not and failing to collect tax it should. It is a routine part of the file rather than an exotic one, but it rewards being set up correctly once.

Selling to larger customers

The step from selling to local buyers to supplying a larger customer changes a production business more than the order value suggests. Payment terms stretch, purchase orders and documentation requirements arrive, and the customer may want financial statements before they will onboard you as a supplier at all. For most owner-managed shops the appropriate answer to that request is a compilation engagement prepared under CSRS 4200, which produces statements with a compilation engagement report and a note setting out the basis of accounting. It is not an audit and not a review, and the report says so — a compilation provides no assurance. Where a customer specifically requires assurance, that is a different engagement, and we will say so plainly rather than let you submit something that will not meet their requirement.

The cash side matters just as much. Longer terms mean you are financing production for longer, so a growing order book can tighten cash exactly when the tax bill from a strong year arrives. That is a planning problem with a planning answer, and it is much easier to handle in advance than in the quarter it lands.

What EverStone handles for you

One CPA, one fixed fee agreed up front:

• T2 corporate return and year-end financial statements
• Inventory valuation basis set and applied consistently
• Work in progress established and carried properly
• Equipment CCA schedules, disposals and recapture
• GST and PST treatment on inputs and output
• Job costing structured so margins are real numbers
• Salary-versus-dividend planning each year

Fixed fees, fully online

EverStone is an Abbotsford CPA firm and every engagement runs online — video, phone and secure upload — so nobody has to leave the shop. The fee is fixed and agreed before work starts, which is what makes the call before a machine purchase worth making. See what it costs.