Accounting for renovation contractors.
Deposits, progress draws, holdback, and HST on residential work, handled properly. So you know which renovations actually made money.
Renovation is one of the hardest trades to keep clean books for, and it is not because renovators are disorganized. It is because the money moves in a shape that standard bookkeeping does not handle well. A deposit lands before any work is done. Progress draws arrive out of step with when costs were incurred. Ten percent sits in holdback for months. Change orders get agreed on a job site and invoiced weeks later, if at all.
Run that through a bookkeeper who treats every deposit as revenue the day it hits the account, and your profit and loss becomes fiction. You look profitable in the month a deposit arrives and unprofitable in the month you actually buy the materials. Owners in that position usually know something is off but cannot point at what, so they end up managing by bank balance instead of by margin.
We set renovation books up so that revenue lands in the period the work was performed, costs attach to the job that incurred them, and deposits and holdback sit where they belong on the balance sheet rather than distorting your income statement. The result is that at the end of a job you can answer the only question that matters: did this one make money, and how much.
Renovators serving Mississauga can use that job-level view to compare local project types, crews, and margins without relying on the bank balance.
What makes renovation accounting different.
A deposit is not revenue
When a homeowner pays you 30% up front, that money is a liability until you perform the work. Booking it as revenue on receipt overstates income in the current period and understates it later, and it makes every job look like it started strong and finished weak. It also inflates the income you might be paying tax on this year for work you will not do until next.
Holdback depends on the contract and its transition rules
Ontario renovation contracts can involve a 10% statutory holdback, but applicability and release depend on the contract date, the contract terms, and applicable transition rules. A preserved or perfected lien can also affect release. We track holdback separately in the books and cash forecast, but the contract and release position should be confirmed with construction counsel.
Substantial renovation changes the HST answer
Most renovation work is a straightforward taxable supply. But where a renovation is substantial enough to be treated as a newly built home for GST/HST purposes, the rebate and self-supply rules can apply and the answer changes materially. This is a fact-specific determination and getting it wrong in either direction is expensive. It should be assessed before you quote the job, not after CRA asks.
Change orders are where margin quietly disappears
The extra half day of framing, the upgraded fixture the client asked for at the site walk, the wall that turned out to have knob-and-tube behind it. If those never make it onto an invoice, the cost still lands in your books and the revenue never does. Job costing that captures change orders as they happen is usually the single biggest margin recovery available to a renovator.
What we handle.
- Deposits recorded as deferred revenue, released as the work is performed
- Holdback tracked as a separate receivable, with release timing built into your cash forecast
- Job costing set up so every material purchase, sub invoice, and labour hour lands on the right job
- Change order tracking, so extras get billed instead of absorbed
- HST filed correctly, with a review of whether substantial renovation rules apply to your work
- T5018 slips prepared and filed for the subcontractors you pay
- Per-job margin reporting, so you can see which types of renovation are worth taking
- Corporate (T2) and personal (T1) tax preparation and filing
Questions, answered.
I only work directly for homeowners. Do I still need WSIB?
There is a narrow exemption in Ontario for independent operators, sole proprietors, partners, and executive officers who perform exclusively home renovation work directly for the occupant or a member of their family and who employ no workers. It is narrower than most renovators assume. Take one contract that is not exempt home renovation work, or hire one employee, and the exemption stops applying. We flag where your work sits and what it means for your payroll setup, but confirm your specific status with WSIB directly.
Do I have to file T5018 slips?
If more than 50% of your business income comes from construction activities and you paid a Canadian-resident subcontractor more than $500 for construction services in the reporting period, yes. Two details catch renovators out. Box 22 reports the gross amount including GST/HST, not the net. Holdback you are still retaining at period end is treated differently from amounts paid, but the reporting year and release treatment depend on the records and contract. Contract date, transition rules, and any preserved or perfected lien can affect the position, so confirm the contract with construction counsel.
How do I know if a renovation actually made money?
You need every cost to attach to the job that caused it, including your own time and the subs you paid, and you need revenue recognized when the work was performed rather than when the cheque cleared. Once both are true, per-job margin falls out of the reporting automatically. Most renovators who see it for the first time discover the same thing: one category of job is quietly subsidising another, and the fix is usually a pricing change rather than a cost-cutting exercise.
Ready for clean numbers?
Book a free consultation. We'll review where your books stand and lay out a clear path. No pressure, no jargon.
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