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Architecture firm bookkeeping: phase billing, honest WIP, and consultant pass-throughs
An architecture firm earns its fee over years but pays its people every two weeks, so the books have one core job: show how much of each fixed fee has actually been earned, phase by phase — and how much of what looks like revenue is really an engineer’s invoice passing through. We keep books for Ontario practices on exactly that basis: earned-by-phase revenue, WIP valued honestly, and every consultant cost matched to the billing it rides on.
By the AnalytIQ Accounting team · Last reviewed: August 12, 2026
Bill by milestone, book by what each phase has earned
Architecture fees arrive as a fixed amount — or a percentage of construction cost — allocated across schematic design, design development, construction documents, bidding, and construction administration. Invoices follow contract milestones; effort does not. The books have to hold both truths at once: what you have billed, and what each phase has genuinely earned based on percent complete. A milestone paid early is deferred revenue, not income; a team deep in construction documents ahead of the next invoice is carrying WIP.
The workflow we set up is deliberately boring. Phase budgets and timesheets live in Monograph or BQE Core; QuickBooks Online carries the ledger with every dollar coded to a project; supplier and consultant invoices flow in through Dext. Month-end becomes a comparison of fee earned to fee billed, phase by phase, instead of a partner's estimate.
| Phase | The question the books should answer |
|---|---|
| Schematic design | Is the fee allocation burning faster than the design is moving? |
| Design development | If the client paid a milestone early, how much of it sits as deferred revenue? |
| Construction documents | The largest fee share — is labour at cost tracking the fee remaining? |
| Bidding and negotiation | A thin allocation that unpriced scope changes love to hide in |
| Construction administration | The long tail — site visits and RFIs against a fee set years earlier |
WIP is taxable income, not a drawer of unbilled time
Architects were never on the short list of professions that could elect billed-basis accounting, so unbilled work in progress belongs in income for tax — CRA does not wait for your invoice. That makes month-end WIP a tax number as much as a management one, and it deserves an honest valuation: hours that will genuinely convert to billings, not everything anyone recorded against the job.
The management payoff is larger than the tax discipline. Aging WIP is the earliest warning system a practice has — a project quietly accumulating construction-administration hours two years after the fee was fixed, a client on pause since spring, scope creep nobody priced. We review WIP monthly and write down what will not bill, so the number the partners and the bank see is one everyone can stand behind.
Consultant pass-throughs inflate revenue and bury the fee
As prime consultant you contract the structural, mechanical, and electrical engineers and rebill their fees to the client, usually with a modest coordination markup. Run those billings through a single revenue line and the firm looks bigger and thinner than it really is. We book consultant billings and consultant costs as their own lines, so net fee revenue — the architecture fee alone — is always visible.
- Match every invoice — each subconsultant bill ties to a client billing, so nothing is paid out and silently never recovered;
- HST in both directions — input tax credits on the engineer's invoice, HST charged on the full amount you bill, pass-through included;
- Timing risk — you owe the engineer whether or not the client has paid you, so consultant payables and project receivables are watched as one pipeline;
- Reimbursables — printing, renderings, travel, and permit fees get the same project coding and are billed through rather than absorbed.
Margin per project, and what a US commission changes
With time coded to phases and consultants split from fees, every project closes with a P&L a partner can act on: net fee against direct labour at cost, phase by phase. Set a few closed projects side by side and the pricing questions answer themselves — which building types carry their construction-administration tail, which clients renegotiate scope midstream, where your minimum viable fee actually sits. The practice-level view follows naturally: overhead against net fees, utilization by role, and the multiplier your billing rates truly achieve.
A commission across the border adds USD invoicing, exchange movements on fees collected months after the work, and withholding questions on professional services. We keep the USD trail clean by project; the tax layer is covered in our cross-border tax guide for architects. And because an OAA practice answers for its records as well as its drawings, the ledger stays review-ready year round — see our bookkeeping services page for how a fixed-fee monthly engagement runs.
Common questions.
Do I pay tax on work I have not billed yet?
Generally yes — architects were never eligible for billed-basis accounting, so unbilled WIP is included in income for tax. The practical answer is a monthly WIP valuation that is honest about what will actually convert to billings, with write-downs taken when they are real.
How should consultant invoices appear in my books?
As their own pass-through lines: consultant billings and consultant costs separated from your fee, each engineer invoice matched to a client billing, ITCs claimed on the way in and HST charged on the full billing on the way out.
Can the books show which phases lose money?
Yes. With timesheets coded to phases and the fee allocated across them, each phase closes against its share of the fee — construction administration is usually where the truth shows up first.
Related reading
Books that earn the fee phase by phase.
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