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Accounting for professional service firms comes down to three jobs: billing on time, tracking unbilled work, and keeping payroll and sales tax filings current. You sell hours, not stock, so the numbers that matter are what you’ve billed, what clients still owe and what your people cost you each month.
What makes a service firm’s books different?
There’s no inventory to count. Your biggest cost is people, and your biggest asset is money clients haven’t paid yet. That shapes everything.
Revenue arrives late. You do the work in March, invoice in April and get paid in May, while salaries went out every month. A firm can be profitable on paper and short of cash in the same quarter. So the books need two views: what you earned, and what you’ve collected.
Keep those apart from day one. One report lists invoices that are unpaid and how old they are. Another lists work done but not yet billed. Most cash problems in a small practice hide in one of those two lists.
Picture a three-person design consultancy in Winnipeg. Between them they logged 120 hours last month on jobs that haven’t been invoiced yet. At $150 an hour that’s $18,000 of finished work with no invoice behind it. Nobody’s lying, it’s just that Friday kept getting in the way. A weekly look at the unbilled list turns that $18,000 into receivables you can chase.
Payroll is the largest recurring filing
Take a small firm with three employees at $6,000 a month each, in Ontario. The payroll remittance calculator shows $5,637.25 to send the CRA each month. That’s $4,225.24 held back from pay plus $1,412.01 of employer CPP and EI. The full cost of that payroll is $19,412.01 a month, which is $1,412.01 more than the wages.
Which date applies to you? The CRA sets it by remitter type. Regular remitters pay by the 15th of the following month, and accelerated remitters pay more often. Penalties for late payment run from 3% to 10% of the amount, with interest on top. The CRA’s page on when to remit payroll deductions spells out the steps: 3% if you’re one to three days late, 5% at four to five days, 7% at six to seven days and 10% beyond that. The tool leaves out workers’ compensation, so add that if it applies to you.
To see one employee’s side, use the take-home pay calculator.
Filing dates and thresholds to put in the calendar
| Item | Rule | Source |
|---|---|---|
| Payroll remittance, regular remitter | 15th of the month after pay | CRA |
| Payroll remittance, quarterly remitter | April 15, July 15, October 15, January 15 | CRA |
| GST/HST small supplier limit | $30,000 in one quarter or four consecutive quarters | CRA |
| T2 corporation return | Six months after the tax year ends | CRA |
| Federal small business rate | 9% on the first $500,000 of qualifying income | CRA |
| Records retention | Six years from the end of the last tax year | CRA |
Put the 15th of every month on a shared calendar with a reminder three days earlier. A firm that remits late once usually does it again, because the cause is a missing habit, not a missing cheque.
GST/HST when your product is advice
Most professional services are taxable, so once your revenue passes $30,000 in a single quarter, or across four quarters in a row, you register. From that point every invoice carries GST/HST. In Ontario it’s 13%, so a $5,000 fee becomes $5,650. The GST/HST calculator does the sum, and the HST reverse calculator pulls the tax back out of a total.
Some professional services are exempt, so check the CRA’s page for your line of work before you assume. If you hold client money in trust, your professional regulator has its own rules for that account, and they sit outside this page.
Profit, partners and the corporate tax return
If you practise through a corporation, the small business deduction cuts the federal rate to 9% on up to $500,000 of active business income for a Canadian-controlled private corporation. Provincial tax adds to it. The corporate tax calculator estimates the total for your province, ignoring associated corporations and phase-outs.
Partnerships are more complicated. The CRA notes that a designated member’s specified partnership business limit is nil, unless an amount is assigned to them, so a corporation can’t count on the full $500,000 in every setup. Pay for a proper review here, once, before the structure is set.
Track profit by client or service line too, since the firm-wide figure hides the weak ones. The profit margin calculator gives a quick read on each. Is a busy client always a profitable one? Often not.
Mistakes that hurt small practices
Skipping time records is the first. If nobody logs hours, you can’t price the next job, and you’ll bill less than you worked.
Second, chasing invoices only when cash runs short. Set a rhythm: reminders at 30 days, a call at 45.
Third, treating owner pay as an afterthought. Pick a salary, dividends or a mix, and run the dividend tax calculator and the payroll figures before the year ends. Finally, don’t leave records in personal accounts. The CRA holds you responsible for adequate records even when a bookkeeper keeps them.
Where we got these figures
Remitting dates and penalties come from the Canada Revenue Agency‘s page on payroll remittances. The GST/HST limit, T2 timing, small business deduction and record rules come from CRA pages on registering for GST/HST, filing a corporation return, corporate tax rates and keeping records. Payroll and HST examples come from our calculators, read September 2026. This site is independent and isn’t run by any government.
Frequently asked questions
What is different about accounting for a service firm?
There's no inventory. Your costs are mostly people, and your cash depends on how fast clients pay. Track unpaid invoices and unbilled work separately.
When must a professional firm register for GST/HST?
When taxable revenue passes $30,000 in a single calendar quarter or over four consecutive quarters. Check the CRA page for services that may be exempt.
How often do I send payroll deductions to the CRA?
It depends on your remitter type. Regular remitters pay by the 15th of the following month, and quarterly remitters pay in April, July, October and January.
Does the 9% federal rate apply to every firm?
It applies to a Canadian-controlled private corporation on its first $500,000 of qualifying active business income. Partnership rules can reduce the limit, so check the CRA page.
Can my accountant take over my record duties?
No. The CRA says you're responsible for adequate records even if a bookkeeper or accountant keeps them for you.
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