Updated Checked by the Tax-Services.ca editorial team How we check
The fastest way to tackle cash flow problems in a Canadian business is to work out which money is really yours. GST/HST you collected and payroll amounts you held back belong to the CRA, and a late payroll remittance carries a penalty of 3% to 10%, so those come first.
Is the cash in your account really yours?
Often it isn’t. A shop that banks $50,000 of sales plus tax hasn’t earned the tax part. A firm that pays staff and hasn’t yet remitted their deductions is holding the CRA’s money too.
So before you cut costs or borrow, build a short list of what’s owed and when. Payroll for a regular remitter is due on the 15th of the following month. GST/HST is due one month after a monthly or quarterly period. Everything left after that is your working cash, the real take-home for the business.
Picture Jas, who runs a landscaping crew in Surrey. Her account showed $18,000 on the 10th and she felt fine, until she listed what was owed that month. Payroll deductions and sales tax took most of it. A one-page list, redone every Friday, is what saved her from guessing.
What does paying the CRA late cost?
| Payroll remittance is late by | Penalty on the amount over $500 |
|---|---|
| 1 to 3 days | 3% |
| 4 to 5 days | 5% |
| 6 to 7 days | 7% |
| More than 7 days, or not paid | 10% |
| Second failure in a year, knowingly or through gross negligence | 20% |
Interest is charged on top from the due date. Take a business with five staff that owes $4,805.16 per pay period, a figure from the payroll remittance calculator. Eight days late costs 10% of the amount over $500, which is $430.52, before interest. That’s real money for a business already short of cash.
Should you borrow to fill the gap?
Sometimes. A line of credit is handy for a timing gap, and a bad idea for a permanent one. Try a $20,000 balance at 9% with $600 paid each month. The maths works out to 39 payments and about $3,101 in interest. The line of credit calculator runs the same sum with your own balance and rate. Rates on most lines float, so yours will differ. We didn’t look up any lender’s rates.
The question to ask is simple. Does the borrowed money bring in more than the $3,101 it costs? If it only covers a hole in pricing, it will be back next month.
Is your pricing the real cash flow problem?
More often than owners think. A $60 item sold at $100 gives a 40% gross margin, per the profit margin calculator. If wages, rent and tax eat 45% of each sale, the business loses money on every sale while looking busy.
The same tool works backwards. Enter your cost and the margin you need, and it gives the price. Raising prices a little often does more than chasing late customers.
How do you get paid faster?
Slow customers are a loan you never agreed to give. Ask for a deposit on bigger jobs. Shorten your payment terms, say from 30 days to 15. Send invoices the day the work is done, not at month end. And pick a firm follow-up date, so a late invoice gets a call on day 16 instead of a shrug in week eight.
None of that needs a fancy system. A spreadsheet with invoice date, amount and due date will do, and it shows at a glance which customers cost you the most in waiting.
What if you can’t pay the CRA on time?
Call early. The CRA can set up a payment arrangement through My Business Account, which lets you pay a debt in smaller amounts over time. Interest continues to build, though.
In some cases the CRA can waive or cancel interest when it confirms you can’t pay. For a business, its example is a situation where paying the interest would put the continuity of operations and jobs at risk. It’s discretionary, so don’t plan around it; the CRA’s taxpayer relief provisions page explains the process. Our pages on disruptions and forecasting cover what comes before and after a squeeze like this.
Sources, and how we checked them
Penalty rates, remitter rules and payment arrangement details come from Canada Revenue Agency pages on remitting payroll deductions, GST/HST filing and payments to the CRA. The examples are calculator results on 2026 data, with the credit line rate of 9% chosen by us for illustration. We couldn’t confirm any bank lending products or government loan programs, so none are described here.
Frequently asked questions
What should I pay first when cash is tight?
Payroll deductions and GST/HST, since that money belongs to the CRA and late payroll remittances carry a 3% to 10% penalty.
How late can a payroll remittance be before the penalty rises?
The penalty is 3% for 1 to 3 days, 5% for 4 to 5, 7% for 6 to 7 and 10% after that.
Can the CRA accept smaller payments?
Yes, you can ask for a payment arrangement through My Business Account. Interest still builds.
Can the CRA cancel interest?
It may, in cases such as confirmed inability to pay, but it's discretionary.
Is gross margin or markup better for pricing?
Work from margin, the profit as a share of the price. Markup looks bigger and hides thin pricing.
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