Milestone billing needs a second set of numbers
The invoice schedule on an engineering engagement is a payment plan, not a measure of work. A 30% milestone on preliminary design can be invoiced weeks after the effort was spent, and a fixed monthly draw on a long assignment rarely matches the hours behind it. Books that recognize revenue only when an invoice goes out will flatter some months, punish others, and make every project look profitable until the final invoice proves otherwise.
Our End-to-End Accounting engagement keeps two views reconciled: what you have billed, and what you have earned. Each month we update a work-in-progress schedule by project, covering hours and costs incurred, percentage complete against the contracted fee, and amounts billed to date. The gap flows into the statements as unbilled WIP or deferred fees, so the income statement reflects engineering actually performed, not invoicing cadence.
Construction-sector work adds a wrinkle: owners on improvement projects often withhold a 10% holdback under Ontario's Construction Act, and consultants' fees can be caught by it. Holdback receivables get their own aging, because they collect on a different clock than the rest of the invoice.
Subconsultants are a pass-through, not your revenue story
Prime consultants routinely bill clients for the geotechnical, structural or electrical subconsultants engaged under their agreement. Handled casually, those flow-throughs inflate revenue, distort gross margin and muddle HST. Handled properly, each pass-through answers three questions:
- Whose supply is it? When you contract the subconsultant and re-bill the client, you are the principal: you charge 13% HST on the full amount, including any markup, and claim input tax credits on the subconsultant's invoice.
- Is there a margin? A 5% or 10% administration markup is your revenue; the underlying fee is a project cost. Netting the two hides whether coordination effort is being paid for at all.
- Does the ledger match the prime agreement? Subconsultant budgets sit inside each project, invoices are matched against them, and unbilled sub costs are accrued into WIP alongside your own labour.
True disbursements, such as printing, permit fees and travel, follow the same rule: recovered at cost or with a stated markup, and never buried in fee revenue.
A month-end close that runs the same way every month
We standardize the toolchain rather than fight it: QuickBooks Online with project tracking for fees and costs by engagement, Dext to capture supplier invoices and staff expenses, and Plooto for approval-based payment of subconsultants. Payroll for salaried engineers and technologists runs inside the same engagement, and the HST return is filed from reconciled books. Because engineering fees are fully taxable, input tax credits on rent, software and subconsultants are worth real money and deserve to be captured completely.
None of it works without timesheets, so we make them cheap to keep: one entry per person, per project, per day, coded to the phase and closed weekly. Timesheet discipline is not bureaucracy in an engineering firm. It is the raw material for the WIP schedule, the billing backup when a municipal client questions an invoice, and the utilization numbers that decide the next hire.
| Situation | Where it belongs in the books |
|---|---|
| Milestone invoiced, work partly done | Revenue to percentage complete; the balance deferred |
| Design work done, milestone not yet reached | Unbilled WIP on the balance sheet |
| Subconsultant invoice received, not yet re-billed | Project cost, with the recovery accrued |
| Holdback withheld by the client | Holdback receivable, aged separately |
| Retainer received at kickoff | A liability until the work is earned |
Reports a principal can act on
The monthly package we build for engineering firms across Mississauga and the GTA is short and specific: fee earned versus cost to date versus estimate to complete for every open project, an unbilled-WIP aging, and receivables aged by client type, because municipal and institutional clients pay on a slower cycle that your line of credit has to absorb. Old unbilled WIP is the report that earns its keep; it is almost always a scope conversation someone has been avoiding.
Two downstream jobs get easier when this discipline holds. Year-end WIP is a tax number for engineers, so a corporate return built from a schedule maintained monthly starts from evidence rather than estimates. And when the firm wants deeper performance work, utilization and realization reporting through our Fractional CFO service builds on cost codes that already exist. If a lender or landlord asks for accountant-prepared statements, a compilation engagement comes off the same clean ledger.
