Kitchen & bath renovator bookkeeping: the deposit is not yours yet

Deposits and progress draws are liabilities before they are revenue

A typical kitchen contract collects money four times: a deposit at signing, a draw when cabinets are ordered, a draw when install starts, and the balance at completion. Only the portion that matches work actually performed is revenue. Everything else sits in a customer deposits liability account in QuickBooks Online, tagged to its project, and is drawn down as each progress invoice goes out.

This is more than tidy accounting in Ontario. The Construction Act treats amounts a contractor receives on account of the contract price as trust funds for the subcontractors and suppliers on that job, and it applies to renovations as much as to new builds. A ledger that shows, project by project, how much of the bank balance is deposit money is how you demonstrate that one client's deposit did not finish another client's bathroom. It also settles the cash-versus-accrual question: a renovator with deposits and jobs spanning month-ends needs accrual books, and our cash vs accrual explainer covers why.

Change orders are the profit most renovators forget to bill

Under Ontario's Consumer Protection Act a supplier cannot charge more than 10 percent above a written estimate unless the customer agrees to the change, so a change order needs the client's sign-off before the extra pot lights go in. The bookkeeping side is where that sign-off turns into money. Each approved change order becomes its own line on the project, its costs are tagged to it, and it is billed on the next progress draw rather than buried in the final invoice where it gets argued.

The failure pattern is familiar: the site lead agrees to move a drain, nobody writes it up, the final invoice arrives with an unexplained increase, and the homeowner refuses it. We keep a running list of approved-but-unbilled change orders and review it at every month-end, because a change order that never reaches an invoice is a margin you paid for and gave away.

Showroom retail and install labour are two businesses under one roof

A firm with a showroom sells cabinet lines, quartz tops, tile, faucets, and vanities at a product margin, and installs them at a labour margin. Blend the two and you cannot tell whether you are a retailer with installers or a contractor with a showroom. We use QuickBooks classes to split Showroom from Install, so every job and every product-only sale reports to the right side.

• Stocked goods — hardware, standard faucets, in-stock vanities — are inventory, counted and costed when sold.
• Special-order cabinetry for a specific job never touches inventory; it is job cost from the day the manufacturer invoices.
• Deposits you pay to manufacturers sit in a vendor deposits asset until the goods land, then move to the project.
• Display kitchens are fixtures, depreciated over time, not stock waiting to be sold.

Job costing in QuickBooks, one cost bucket at a time

We run renovation books on QuickBooks Online Projects with Products and Services items mapped to cost-of-sales sub-accounts, so a job's profitability reads directly off the ledger: contract plus approved change orders, less materials, subcontractors, burdened labour, job overhead, and warranty. Receipts from the plumbing wholesaler and the big-box run come in through Dext with the project name on them. Where Buildertrend, Houzz Pro, or Jobber holds the schedule and the selections, we sync the invoicing side into QuickBooks rather than maintain two ledgers.

Posting callbacks to the job that caused them is the detail most renovation books skip, and it is the one that shows which designer, crew, or product line is quietly eating margin six months after the cheque cleared.

Holdbacks, subcontractor files, and the month-end tie-out

Homeowners rarely retain the Construction Act holdback, but builder clients do, and if you retain it from your own subs it needs its own payable account rather than a note in someone's head. Every sub gets a file before their first payment: legal name, business number or SIN, HST registration checked, and a WSIB clearance certificate. That file is what makes the T5018 slips a January export instead of a February scramble.

Month-end closes on four reconciliations: bank to ledger, the customer deposits liability to the list of open projects, vendor deposits to open purchase orders, and the unbilled change order list to zero or an explanation. If your cabinetry comes from US manufacturers in US dollars, our renovator cross-border guide covers how those deposits and border charges enter job cost, and our bookkeeping services page describes the monthly close we run for every client.

Source: Ontario — Construction Act, R.S.O. 1990, c. C.30 (trust provisions, Part II).