50 REAL Bookkeeping tips for Canadian Small Business Contractors Like You

50 Bookkeeping Tips for Contractors and Construction Businesses in Canada 

 

 

 

"NO fluff, NO hype, NO mumbo-jumbo, just a goldmine of bookkeeping tips for contractors and a shameless plug for our bookkeeping and tax preparation services at the end."

 

 

 

Let’s get to it, shall we?

 

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Tips for purposeful Construction bookkeeping

 

1. Bookkeep for compliance. The reason most people bookkeep is to have financial data to report to the CRA for taxes like GST, Payroll tax, and income tax.

 

2. Bookkeep for profitability. The main purpose of construction bookkeeping is for CRA compliance, but to grow a solid, profitable business, you need to know more than just income and expenses.

 

3. Learn to be a perfectionist in accounting. If you don’t have your books in good order, you’re contracting business will suffer.

 

4. Consider having two sets of books. You can have your bookkeeper keep the set of books for tax reporting purposes, while you keep a simple set of books tailored for business growth and tracking purposes. 

 

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Bookkeeping Tips for Keeping and Storing Construction Expense Receipts

 

5. Keep all expense receipts. Put them in a tote, scan them, categorize them, just know where they are. You’ll have to keep receipts for 6 years. 

 

6. Consider safest receipt storage. If they’re scanned, they won’t degrade. If they’re stored in a box, they won’t be subject to hardware failure. Why not both?

 

7. Circle or highlight receipt Date, total, and GST as you get them. Because it’s a pain to go through receipts and try to find those. 

 

8. Neatly categorize your receipts. Organize them by month, or by categories such as meals, materials, office expenses, etc. 

 

9. Buy responsibly through contractor Credit accounts. If your vendors, let’s say a lumber yard or a home improvement store, will allow you to pay a monthly bill instead of cash purchases (and you aren’t going to rack up a bill unnecessarily), it can make your bookkeeping for expenses easier. A LOT easier. 

 

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Tips on how Business Structure affects Bookkeeping

 

10. Decide whether you’re going cash basis or accrual basis. With cash basis accounting, you don’t include the accounts payable in expenses nor accounts receivable in income. Some companies are forced to go accrual, check if you meet those requirements. 

 

11. Setup a Corporation Fiscal year based on the slow season. In Canada, you can choose when your T2 tax return is due for your construction company. Try to time it so the tax reporting is due in the slowest month for you. If you have an accountant, ask when the best time will be. 

 

12. Keep your business model simple. Diversification can be tempting when you are a contractor. If a client needs general work done and you do roofing, it can be tempting to accept, but won’t benefit you in the long run. 

 

13. Incorporating in Canada? Consider selling a vehicle to the corporation. In order to have a vehicle on the books as an asset, you need to have the title of that vehicle in the company’s name. If you get audited and it’s not, uh oh!

 

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Bookkeeping Tips for Keeping Track of your Invoices

 

14. Track customer invoicing. Software is great. It doesn’t have to be expensive, excel is fine. If you are doing it the old-school contractor way with the carbon copy receipt invoices, get a PAID stamp and write the cheque number or ETF with the date on the invoice when it gets paid.

 

15. Don’t get too detailed on the invoice. When you get too detailed on your invoice, customers start to think you are “nickel and diming” them to death. 

 

16. Make a spreadsheet or folder for each customer. It can be as simple as a piece of paper scribbled on with all your detailed fees and estimates. This is even more important for large projects.

 

17. Clearly define payment terms on the invoice. There are people who will wait until the last hour to pay a contractor because the invoice says 90 days to pay or something like that. If you are not receiving payments for construction jobs in a timely manner, consider a late payment fee and a discount if paid within XX days.  

 

18. Consider jobs with recurring invoicing. This is usually in the maintenance area, but get creative on how to get that regular income coming in. 

 

19. Send invoices immediately after completing a project. Make sure your customers get their invoices right away. 

 

20. Resend invoices to customers who have not paid regularly. Weekly or every two weeks if they have told you they would pay but “forgot”.

 

21. Highlight Customer’s name on invoice to avoid mix-ups. If you give the wrong invoice to a customer they will never forget it. 

 

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Bookkeeping Tips for Tracking Maximizing Profitability

 

22. Know your job costs. If you can classify your expenses to match construction income, great. It can be as simple as keeping a sheet of paper with Job Income at the top and Job Expenses below it. 

 

23. Get a business bank account. If you are incorporated in Canada, you should have a business bank account. This separates personal and business expenses so they don’t get confused.

 

24. Get paid in stages for large jobs. Nothing is more frustrating than having a 6 figure accounts receivable and no money in the bank to get the jobs done.

 

25. Subcategorize income on the books. Don’t be afraid to get really specific with subcategories. After a while, this will show you which construction jobs are the most profitable and which are the time wasters.

 

26. Look at net income per job for estimating purposes. Are you consistently over-spending on your bathroom remodels? How would you know if you aren’t tracking job costs?

 

27. Record change orders and track Added Income. Do bathroom remodels typically lead to other renovations? Sometimes contractors charge a lot less for added jobs and change orders than they should, turning what looked like a profitable job into a dud.

 

28. Track Small Job Profitability. Small jobs take more advertising but keep the cashflow going. If you find you can consistently profit from a type of small renovation job, say painting, you may want to expand in that direction. 

 

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Bookkeeping CRA Government Compliance Tips for Contractors

 

29. Stay current with GST remittances. You don’t want to keep paying penalties and interest on late GST filings. Make sure you have the GST your received held in your account so you have enough to pay it monthly. 

 

30. Stay Current with Payroll. Don’t miss a payroll remittance in Canada with a construction company. 

 

31. Try using multiple bank accounts. You can separate accounts for things like payroll, GST, and income taxes. 

 

32. Make estimated GST Payments. Did you just receive a large deposit? Why not send some of that to the CRA as a GST instalment so you don’t have to do it later (or forget to). 

 

33. Make Income Tax Instalments. The snow melts, Canadians want to start projects. Is springtime a big money maker for your contracting company? It is if you’re a landscaper in Canada. Send some of that deposit money in to the CRA as an income tax instalment for next year’s taxes. 

 

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Bookkeeping Tips for Subs, Trades, and Construction Employees

 

34. Track construction subcontractor payments. In Canada, you need to submit a T5018 for construction workers at the end of the year. You need to know how much you paid them including GST.

 

35. Track time spent per project. Wouldn’t it be great to know exactly on average how long a kitchen reno takes? This will help your renovation estimating.

 

36. Consider subbing out work not in your scope. Get a team of tradesmen on your side by passing add on work to them so that you can focus on your specialty trade. 

 

37. Consider outsourcing the bookkeeping. Software alone can get expensive, and you might as well hire an outside bookkeeper in a lot of cases. 

 

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Bookkeeping Tips for Contractor Expenses

 

38. Know your fixed expenses. Do you rent a storage shop or have monthly bills that don’t depend on how much work you preform? These are fixed expenses and it’s a great idea to know what they are. 

 

39. Track your variable costs. These are costs that go up as you do more business, and down as you do less business. Construction subcontractors like tile installers, plumbers, electricians, carpenters, painters, drywall tapers are going to be your biggest variable expense most likely. 

 

40. Look at Monthly Income Statements. Does fall bring big profits, while February is slower than molasses? This would be great to know so you can spend advertising dollars a little more effectively.

 

41. Track material costs. We saw lumber shoot up in 2021, having a finger on the pulse of material costs can save you from underbidding a project.

 

 

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Bookkeeping Tips for Construction Assets

 

42. Keep an inventory of Tools. Small tools are generally fully deductible and don’t need to be amortized or depreciated. Larger tools will need to be amortized over a period of time, usually 5 years. These will need to go on the balance sheet as assets. 

 

43. Record cost and sale price of construction vehicles. If you are buying and selling company vehicles, you’ll need to also report those on the balance sheet. 

 

44. Upgrading/Customizing Construction equipment? Add it to the cost basis. If you choose to make your existing equipment better rather than buying new construction equipment (let’s say scaffolding), you can add the costs of that to the existing cost basis of the equipment. 

 

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Tips for Bookkeeping Tools for Contractors

 

45. Get a dedicated computer for business bookkeeping activities. Computers are relatively cheap, why risk keeping your business records on a laptop. 

 

46. Choose software wisely. Software can get expensive and isn’t necessarily going to do you much better than not if you are hiring a bookkeeper anyways. If you are doing the books yourself, you could try any of these. 

 

47. Make a template for jobs in excel. You can record income and expenses per job and put it in a folder. 

 

48. Consider receipt scanner or cell phone app for receipts. When you get one, take a picture. 

 

49. Set aside regular time each day to go over financial organization. If you procrastinate, it will snowball and become overwhelming for you.

 

50. Understand software is not going to run your business for you. You need to get on top of it. If you are too busy for that, seriously consider hiring a bookkeeper who is experienced in bookkeeping and accountingfor construction companies and trades in Canada. 

 

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These are 50 practical bookkeeping tips that are proven to work successfully for your contracting business.

 

Contact Us Today For Bookkeeping and Tax Services for your Construction Company 

Remember, everyone reading this is going to be at different stages of their business. Some construction companies are big enough to hire a full-time bookkeeper, while others have plenty of down-time and aren’t big enough to outsource the bookkeeping just yet. 

 

If you are somewhere in the middle of those two sizes of contracting companies, in Canada, and are looking for a bookkeeping and tax preparation service, please consider our bookkeeping services.We are located in Southern Alberta and can perform bookkeeping and tax services to anywhere in Canada.

Our goal is to find long-term partnerships with contractors and construction companies in Canada by offering value-based bookkeeping and tax preparation services. We offer full-cycle accounting services, so you won’t need to go anywhere else.

You will find our rates very reasonable and we have extensive expertise in bookkeeping, filing tax returns, dealing with the CRA, and much more.

As a fellow Canadian, I wish you all the best and hope to hear from you.