Excavation contractor bookkeeping: what does that machine really cost per hour?

Every machine gets its own ledger

We run each significant unit as a profit centre: its fuel, parts, repairs, insurance, financing interest, and depreciation collected against its hour-meter readings, logged monthly. Divide owning-plus-operating cost by metered hours and you have the machine's true hourly cost — the number that tells you whether the rate you quote covers the iron doing the work. Most heavy, power-operated movable equipment sits in CCA Class 38 at 30 percent declining balance, and we keep tax depreciation running per unit so disposals and trade-ins settle cleanly.

The per-unit repairs ledger earns its keep at replacement time: when undercarriage work and hydraulic repairs on an aging excavator start rivalling the payments on a newer one, the decision is already made in the numbers.

Fuel and maintenance are job costs, not overhead

Diesel is one of the biggest operating lines in excavation, and it only means something when it is tied to a machine and a job. Fill logs from the site tank or cardlock record which unit took the fuel; hour meters say which job the unit was on. Off-road equipment can typically run coloured diesel, which does not carry Ontario road tax — so coloured and clear fuel purchases stay coded separately, and a truck fuelled from the wrong tank never becomes an audit story.

Maintenance splits the same way. Ground-engaging tools — teeth, cutting edges, bucket wear plates — are consumables that burn with the ground conditions, so they get costed to the machine and, through its hours, to the job that chewed them up. A job in rock that eats a set of teeth every week is a different job than the bid assumed, and the books should say so before the next rock bid goes out.

Progress billing needs a WIP schedule behind it

Excavation jobs bill as they progress — mobilization, then draws against work performed — and the monthly close has to compare billings to actual completion on every open job. Underbillings are earned work you have not invoiced, which is your working capital sitting in someone else's project; overbillings are cash you have collected but not yet earned, which is next month's work already spent. A simple WIP schedule showing both, job by job, is the single most valuable report an excavation contractor can get monthly.

Holdbacks ride along on most contracts: Ontario's Construction Act 10 percent retention sits in its own holdback receivable account, aged by expected release, with the HST on it deferred until release under the Excise Tax Act's timing rule. Mobilization and float charges are billed as line items, not absorbed — moving a 30-tonne machine across the GTA is a real cost that belongs on the invoice.

Financing, T5018, HST, and the close

Heavy iron is almost always financed, so the books keep principal and interest split per unit, watch balloon payments before they arrive, and track how loan balances compare to machine values — the equity in the fleet is often the company's real balance sheet. Big equipment purchases also produce big input tax credits, so the GST34 in a purchase month deserves attention: filed promptly, it can return a meaningful refund while the first loan payments are drawing down cash.

Hired dump-truck haulers paid per load are subcontractors, which means T5018 slips annually and WSIB clearance checks before payment. The rest is rhythm: hour-meter and fill logs in, receipts through Dext into QuickBooks Online, WIP and per-machine reports out — the close we describe on our bookkeeping services page. And when the next machine comes off a US auction block, the duty, GST at the border, and financing mechanics are covered in our cross-border tax guide for excavation contractors.