The monthly financial close for a contractor

STEP 01 OF 10

Reconcile the bank accounts first, before anything else in the close

Every other step in a monthly close depends on the bank reconciliation being right first — the trust or holdback accounts if the firm holds them, the operating account, and any project-specific accounts. Close the bank reconciliation on day one or two of the close cycle, not as a final check after everything else has already been entered against an unverified balance.

A contractor typically holds more distinct accounts than a general business of similar size — a project-specific account for a larger job, an equipment-financing account, sometimes a jointly administered holdback account under a province's own lien Act. List every account the firm actually holds at the start of each close cycle, and confirm every one of them was reconciled before moving to the next step, rather than working from memory of which accounts “usually” need checking.

STEP 02 OF 10

Apply the GST/HST construction-holdback carve-out to every progress bill with retained holdback

ETA s. 168(7) is the provision that changes the normal timing rule specifically for construction holdback: GST/HST on the holdback portion of a progress payment is not due until the holdback is actually paid out, not when the underlying supply of construction services happens. A close routine that applies the standard timing rule to the full progress bill, holdback included, is remitting tax early on money the firm has not actually collected yet.

Split every progress bill's GST/HST calculation into two pieces at the close: the tax on the collected portion, due this period, and the tax on the retained holdback portion, which sits until release. Track the deferred holdback GST/HST as its own line so it is not lost or double-counted when the holdback is eventually released.

STEP 03 OF 10

Reconcile the T5018 data to whichever reporting-period basis the firm already committed to

ITR 238(3) lets a firm choose a calendar-year or fiscal-period basis for its T5018 reporting, but once chosen, the choice cannot be changed for subsequent years without Ministerial authorization. The monthly close needs to be building toward whichever basis is already locked in, accumulating subcontractor payment data consistently every month rather than reconstructing it at year-end.

The return itself is due within six months of the end of the reporting period. Build a specific closing task, every month, that updates the running T5018 file rather than leaving it as a once-a-year project separate from the regular close.

STEP 04 OF 10

Apply the correct record-retention clock, by entity type, to what the close produces

ITR 5800(1)(a)-(b) sets a two-year retention clock, running from dissolution, for a corporation's minute books, share records, and general ledger with its supporting contracts. ITR 5800(1)(c) sets a six-year clock for a non-corporate business's general ledger and special contracts, running from the end of the taxation year the business ceased. These are different clocks for different entity structures — confirm which one actually applies to your firm before assuming the standard six-year figure covers everything.

ITA s. 230(4)(b) still sets the general six-year retention standard for ordinary business records outside the specific corporate-dissolution categories in ITR 5800 — most of what a monthly close actually produces falls under this general rule, not the narrower dissolution provisions.

STEP 05 OF 10

Close job cost data to the same period the financial statements close on

A monthly close that finalizes the general ledger before job cost data for the same period is fully reconciled produces financial statements that do not actually tie out to the underlying project numbers. See building a job cost reporting pack for the reconciliation this step assumes — close job cost and the GL together, not job cost as an afterthought once the GL is already locked.

Reconcile committed cost, not just billed and actual cost, at the same close — a project that looks on-budget on billed cost alone can already be over budget once signed but not-yet-invoiced commitments are added in. Catching that gap at the monthly close, rather than at project completion, is the entire reason to close job cost and the general ledger together rather than separately.

STEP 06 OF 10

Update the rolling 13-week cash forecast as part of the same close cycle

The monthly close is the natural point to true up the 13-week cash forecast against what actually happened during the closed month, even though the forecast itself rolls weekly rather than monthly. Use the close's confirmed actual figures to correct the forecast's assumptions going forward, rather than letting the two processes drift apart on separate schedules.

Compare the forecast's assumptions specifically for holdback timing against what the close just confirmed — if the forecast assumed holdback would release on a certificate date but the close shows Ontario's contract-anniversary trigger actually applies, correct the forecast's assumption immediately rather than letting the same mistaken trigger date carry forward into next month's rolled-forward forecast.

STEP 07 OF 10

Reconcile input tax credits claimed against the job cost data they relate to

ITCs claimed for the period should trace back to specific, coded job costs, not sit as an undifferentiated GST/HST recoverable balance on the general ledger. A monthly close that reconciles ITCs against the underlying job-cost transactions catches a missed or duplicated ITC claim while the supporting documentation is still easy to locate, not months later during a review.

Pay particular attention to ITCs on holdback-related invoices given the s. 168(7) carve-out in step two — the timing split between the collected and retained portions of a bill applies to the ITC side of a subcontractor's own books as well as to the GST/HST a firm collects and remits, and a close that tracks one side of that split without the other will not fully reconcile.

STEP 08 OF 10

Verify every account's own reconciliation, not just the accounts that changed

A close routine that only reviews accounts with new activity that month can miss a stale balance sitting untouched for good reason — or for a bad one. Run a full trial-balance review every month, even for accounts that look unchanged, as a habit rather than an exception-only process.

STEP 09 OF 10

Close the collections and bad-debt review as its own checklist item

See a collections process that keeps the client for the aging discipline this step assumes — the monthly close is the point to confirm every aged receivable has an active follow-up assigned to it, and to formally assess whether any account has crossed from slow-paying into genuinely uncollectible.

STEP 10 OF 10

Sign off the close with a named reviewer, and file it the same way every month

A close that different people run differently every month cannot be compared month to month with any confidence. Write the checklist down — the same order every time, the same reconciliations, the same sign-off — and keep the completed checklist itself as part of the retained records, alongside the underlying financial data it certifies.