Cash flow through a seasonal year in the trades

A seasonal trades business earns in six or seven months and spends in twelve. The obligations generated by the good months come due in the quiet ones, which is why a landscaping or paving corporation can finish August with the best gross margin it has ever had and still be scraping in February. The number that decides whether that happens is how much cash has to exist on November 1, and it has to be worked out in June and held back from every deposit after that.

This applies to exterior work, paving, roofing, pools and landscaping, and to any HVAC or plumbing shop where installations bunch into two peaks and winter is service calls. It is among the things we spend the most time on in accounting work for contractors.

What the slow season has to fund

HST is money that was never yours

Take it out of the operating account on the day it arrives. On a tax-included deposit the HST portion is 11.5%, because $13 of tax sits inside every $113 collected. A $22,600 progress payment carries $2,600 of HST. Move it to a second account the same day and never draw on it for operations.

That account will hold more than you eventually remit, because input tax credits on your material and subcontractor invoices reduce the net figure. The surplus is the first part of the winter cushion, and the least painful part to build, because it never felt like revenue.

Timing is the other half. HST becomes payable on the earlier of the day the money is paid to you and the day it becomes due, so an August invoice generally sits in a period that gets remitted in the autumn or the winter. Monthly and quarterly filers file and pay one month after the reporting period ends. Annual filers whose net tax for the previous fiscal year was $3,000 or more pay quarterly instalments through the current year, which is a better rhythm for a seasonal business than one large payment. Our deadline checker turns your own fiscal year end into the actual dates.

One item routinely gets left out of the reserve. HST on a statutory holdback follows its own timing rather than the timing of the draw it came from, which we deal with in construction holdbacks, HST and WIP.

Working out the November 1 number

Do this in writing before the season starts. Take an exterior contractor with a December 31 year end, roughly $900,000 of revenue, six busy months from May to October and six slow ones.

Divided across six busy months, that is $27,750 a month to be set aside starting with the first good month, not the last one. Against $750,000 of net busy-season revenue it is 22 cents of every dollar billed before tax.

So the rule at the bank becomes two transfers, not one. On that $22,600 deposit: $2,600 to the HST account, then 22% of the remaining $20,000, which is $4,400, to the reserve account. $15,600 stays in operations. You are holding back 31% of what hits the bank. Contractors who run this number for the first time usually assume it is wrong, and it usually is not.

Instalments are sized on a year you already had

Corporate instalments can be calculated three ways: an estimate of the current year, the previous year's tax, or a combination of the previous two years. Most software defaults to a prior-year basis, which is where the seasonal trap sits. A quiet year followed by a strong one produces small instalments and then a large balance falling due two or three months after year end, in the worst month of the cycle, with interest if it is late.

The balance-due day is two months after year end for most corporations. It stretches to three months where the corporation was a Canadian-controlled private corporation throughout the year, claimed the small business deduction in the current or previous year, and its taxable income for the previous year did not exceed its business limit. Instalments are not required at all where tax payable is $3,000 or less in both the current and the previous year.

Re-forecast at the fiscal midpoint. If this year is materially better than last, the instalment schedule is under-collecting and the difference has to be reserved rather than discovered. And your personal tax balance is due April 30 even where the filing deadline is June 15, a distinction that costs seasonal owners arrears interest every spring.

How you take money out changes the shape of the winter too. Salary carries a source deduction obligation running through a revenue-free quarter, while dividends can be declared when the cash is there, and that choice has consequences well beyond cash timing. We work through it in salary versus dividends.

What a rolling 13-week view actually looks like

Annual budgets do not help here. What helps is one sheet with 13 weekly columns, updated every Monday, where week one drops off and a new week 13 is added. Receipts come from the billing schedule and each customer's collection history rather than from an average. Payments come from the payroll calendar, the remittance dates and supplier terms.

Same contractor, starting the first week of November with $166,000 in the bank:

The point of the exercise is the last row. January 30 carries the HST remittance, the WSIB premium and an ordinary payroll week together, taking $55,500 out of an account that has been declining for three months. Seen in July that is a planning problem. Seen on January 28 it is a phone call to a lender who has no reason to move quickly.

Roll the view forward weekly and the March 31 corporate balance appears in the window in early January, with eleven weeks of warning rather than three days.

A line of credit and a term loan solve different problems

An operating line is a revolving facility for a timing gap. You draw in February, repay in June, pay interest only on the drawn balance, and the limit is usually margined against receivables and supported by a personal guarantee. It suits a business that is profitable across the year and negative across a quarter. It is also generally repayable on demand, which is worth knowing before you rely on it.

A term loan is fixed principal on a fixed amortization, and it belongs against an asset with a useful life: a truck, an excavator, a leasehold improvement. Matching the repayment term to the life of the thing you bought keeps the payment inside the period the asset is earning.

The failure mode is using one for the other. A line of credit that never returns to zero during the busy season is funding a permanent shortfall in working capital rather than a seasonal gap, and a lender will read it that way at renewal. A term loan taken out to cover a winter is a payment you will still be making through the next two.

Arrange the line in September, while the statements show a strong year and you do not need it. Lenders price and approve very differently in February. Pricing the work correctly is the other half of the same problem, and we cover that in what an hour actually costs to sell.

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General information only, current at August 2026. Tax rules change and GST/HST status is fact-specific. Confirm your own position before relying on anything here.