Work in progress is where the month hides
On long-lead work, the invoice and the earning of the money can sit months apart. A five-axis job quoted in March, with bar stock bought in April, machined through May and shipped in June, spends most of its life as work in progress: material, setup hours, run hours and outside processing that are money spent but not yet billed. Books that only record invoices call May a loss and June a windfall, and both readings are wrong.
We carry WIP at the job level and release it to cost of sales when the parts ship, so gross margin lands in the same month as the revenue it belongs to. Where the purchase order allows milestones on long-lead work, we set the progress billing up in the books as well, because a milestone invoice is earned revenue with HST attached, not a deposit to be sorted out later. Month over month, the statements then move with shop performance instead of with invoice timing.
Scrap and rework are data, not bad luck
Every shop scraps parts; the accounting question is where. A part that fails at the first op costs a slice of bar. A part that fails at final inspection after four setups carries every hour that ever touched it, plus the outside processing it already visited. We give scrap and rework their own accounts, tied back to job and operation, so month-end shows which jobs and which machines are leaking margin instead of burying the loss inside cost of sales.
The chip bin is the other half of the story. Offcuts, drops and chips sold to the recycler are taxable revenue: the cheque belongs on its own income line with 13% HST collected, not in a miscellaneous account and never in anyone's pocket. Remnant bar that will be used again goes back into inventory at cost, which is worth real money in a year when material prices move.
The ledger has to agree with the shop system
If the floor runs on JobBOSS, ProShop or Fulcrum, the job costing already lives there; the common failure is a general ledger that never reconciles to it. We map the shop system's activity into QuickBooks Online so the ERP and the statements tell one story, with Dext capturing the supplier invoices behind every input tax credit and Plooto running payment batches on supplier terms rather than on panic. Outside processing, the heat treating, anodizing, plating and grinding sent out the door, stays pinned to its job as a direct cost instead of dissolving into overhead.
Here is what each job's cost record has to carry before the statements can mean anything:
| Cost element | Where it comes from | What month-end must show |
|---|---|---|
| Material | Bar and blanks issued to the job, remnants returned to stock | True material cost per part, net of usable drops |
| Setup and run hours | Machinist time clocked to operations | Loaded labour cost: wages plus CPP, EI, vacation pay and WSIB |
| Tooling consumed | Inserts, endmills and taps drawn from the crib | Consumable cost by job, job-built fixtures flagged separately |
| Outside processing | Heat treat, plating and anodizing invoices | A direct cost tied to its job, never blended into overhead |
| Scrap and rework | Parts failed at inspection, hours spent recovering | The operation where the margin actually leaked |
Payroll, HST and one file to year-end
Machinist payroll mixes journeypersons, apprentices at scaled wages and overtime that follows the delivery schedule, with WSIB premiums across all of it because machining is covered employment in Ontario. Our End-to-End Accounting service puts bookkeeping, payroll, financial reporting and tax filing under one roof, so wage runs, source deductions and T4s come out of the same records as the job-cost reports the quotes rely on.
A machine purchase usually pushes the HST return into a refund position, because the input tax credits on one invoice can dwarf a quarter's tax collected on sales, and refund returns routinely draw CRA verification letters; the file should be ready before the letter arrives. At year-end the same books flow into the T2 through Corporate Tax Filing with no clean-up project in front of it. And because a defensible machine-hour rate is built from clean job costs, these numbers feed straight into the quoting discipline on our machine shop CFO page. We work with shops across Mississauga and the GTA, and every engagement starts with a free 15-minute discovery call and a written quote.
