Tips for Setting Up a New AEC Business
- Reach CPA
- Oct 7
- 7 min read
Updated: Oct 7
PART 2
Welcome back for Part 2 of our Tips for Setting Up a New AEC Business series.
Over two posts, we cover eight financial foundational areas people often gloss over when starting an AEC firm. If you missed it, check out Part 1 here!
In Part 2, we dive into the next four:
Payroll Made Simple: Setting up payroll for AEC Teams
Business Banking & Cashflow: Building a financial foundation
Your Tech Stack: Tools every AEC firm needs from day one
To Niche or Not to Niche?
Let's dive in!
1. Payroll Made Simple: Setting Up Payroll for AEC Teams
Starting an AEC firm is exciting—and a little chaotic. Payroll is one system you want clean from day one. Do it right and it hums in the background; do it wrong and you’re dealing with cash-flow crunches, CRA penalties, and grumpy staff.
The challenge:
Compliance & classifications: Employee vs. subcontractor, overtime eligibility, vacation/stat holiday pay, workers’ comp, provincial rules.
Deductions done right: CPP/EI, income tax, benefits, employer health taxes where applicable, and union/industry premiums if relevant.
Clean project costing: Labour must roll into WIP and job cost reports accurately, or your “profitable” project isn’t.
Human impact: Pay errors destroy trust fast. Payroll is culture-critical.
Things to consider:
Architects: Integration with project costing is key to understanding profit margins. Fixed-fee work demands tight integration between time tracking and project costing so you can spot scope creep early and protect your margins.
Engineers: Overtime rules and banked time need clear approvals. Hours must post to the right job/phase or budgets get blown without warning.
Contractors: Project-based and seasonal subs add moving parts—collect WCB/insurance, decide when T4A/T5018 reporting applies, and keep payments tied to projects so costs don’t go missing.
Put it into practice
Classify and codify. Decide employee vs. subcontractor up front and write clear OT/banked-time rules. Different slips and deductions = different risks—get this right first.
Integrate time with costing. Use time tracking that tags hours to project → phase → task, and map earnings (regular, OT, vacation, per diems) to the GL and job-cost buckets.
Do a full dry run. Test with dummy data: deductions, OT, vacation accruals, ROEs, and postings to projects/GL. Fix mapping before go-live.
Lock the cadence and compliance. Align the payroll calendar with billing/draws, keep a one-payroll cash reserve, maintain a one-page SOP, and follow your CRA/WorkSafe remittance schedule and year-end slips.
Our Takeaway
Keep it simple: classify people properly, make time flow cleanly into projects and the GL, and document the process. That’s how you get accurate job costs, predictable cash flow, and a calm year-end.
Source a software which tracks this for you (we highly recommend WagePoint as it connects with Xero and submits CRA remittances, generates T4’s as well as submits records of employment. This will save you HOURS of work and headache from having to manage corrections.
Tools to explore:
Wagepoint or PaymentEvolution for Canadian payroll
2. Business Banking & Cash Flow: Building a Financial Foundation
Too many new AEC firms start out using personal bank accounts. This gets messy quickly. From day one, you need clean separation between personal and business money so you can actually see what’s happening, stay onside with the CRA, and make better decisions about growth.
Why it matters: separate banking gives you real cash visibility, an audit trail lenders trust, and the infrastructure to scale—progress billings, retainers, holdbacks, payroll, and vendor payments all flowing through the right buckets.
The challenge:
Mixing personal and business funds makes cash flow forecasting nearly impossible. You can’t model payables vs. receivables, set aside GST/HST, or understand runway when groceries and site materials live in the same account. Reconciliations take longer, and your job-cost reporting is never quite right.
Without clear separation, you risk tax problems and missed growth opportunities. Commingled transactions create messy deductions and weaker documentation.
AEC specific considerations:
Architects: Long project cycles demand careful cash flow planning across slow seasons.
Engineers: Retainers and staged payments must be tracked against progress to avoid running ahead of cash. Time-and-expense work benefits from clear WIP (work in progress) and AR (accounts receivable) dashboards so you bill (and collect) on rhythm.
Contractors: Multiple concurrent jobs mean staggered deposits, change orders, and holdbacks.
Put Into Practice
Pay yourself a salary, this will simplify tax planning and improve the value of your company in the long run.
Source easy to use online banking which help you control your cashflow easily; we highly recommend Float Financial for this.
Open a set of ‘core’ accounts on day one:
Business operating (daily inflows/outflows)
Payroll clearing (so wages/remittances don’t tangle with AP)
Tax reserve (automatic transfers for GST/HST, corporate tax)
Profit/working-capital reserve (high-yield savings)
Business credit card (points + clean separation; set per-employee limits)
Build a simple cash routine.
Weekly: update Accounts Receivable/Accounts Payable, sweep tax to reserves, review WIP, and compare next payroll + supplier runs to incoming draws.
Monthly: 13-week cash forecast, review holdbacks, and stress-test slow-season scenarios.
Our Takeaway
Separate your money early, route it through the right buckets, and make cash reviews a habit. When banking structure + simple routines meet AEC-specific controls (project tagging, staged billing, holdbacks), cash gets calmer, decisions get faster, and growth gets safer. Straightforward, simple systems—that’s the goal.
Tools to explore:
3. Your Tech Stack: Tools Every AEC Firm Needs from Day One
Starting strong means setting up lean systems that scale. Yes, there’s a platform for everything; no you don’t need them all. Cover the essentials first; you can add to and expand as your business grows. Establishing a solid foundation will ensure you remain efficient and on-budget.
The challenge:
Running on spreadsheets and sticky notes may work for a few months, but it won’t scale.
A smart tech stack keeps your projects, people, and finances organized.
AEC specific realities
Architects: Cloud-based accounting (Xero), document management (Hubdoc), and design tools all working together.
Engineers: Integrates collaboration and task management for multi-disciplinary teams (Asana, ClickUp for example). Need cloud-based document and communication systems for remote work that covers the full project lifecycle from design to construction and beyond.
Contractors: Focus on software designed for managing construction projects, estimating costs, preparing and submitting bids, scheduling and payroll. Contractors need tools that integrates these tools to streamline workflows, automate manual processes, improve communication between the office and field, and manage project costs and timelines effectively.
Put It Into Practice
Make sure you have the basics covered, you can always expand as your business needs grow.
Accounting Software – this is essential for tracking your expenses, handling payroll, automating invoicing. (ex. Xero or QBO, WagePoint, etc)
Communication Tools – crucial for internal teams or connecting with clients, something with messaging, document sharing, video conferencing. (ex. Google Workspace, Microsoft 365, Teams, Loom)
Website Platform – think of your online presence as the gate to your business, without one prospective clients won’t have an outlet to connect with you. (ex. WordPress/Wix, select social media platforms your clients connect most with)
4. To Niche or Not to Niche: That is the question
It’s easy in the beginning to want to open your doors and take any/all projects that come your way. We find that you’ll get farther, faster by focusing on one area and becoming the obvious choice.
For example: specialize in community agricultural grow-house projects. You’ll become the go-to, reuse your playbook, work faster, and charge more—because you know the terrain and keep costs down as a result.
Also, plan your pricing structure, think fixed fee vs hourly. Keep in mind each project has different scopes, phases, timelines and risk. Remember that the client’s payment or funding timeline might not align with when you need to cover your invoice, plan accordingly.
Niche + clear pricing = smoother projects, stronger margins, fewer surprises.
Things to consider:
Expected length of contract and when you will get paid VS. your overhead costs.
How many more stakeholders are likely to be involved, ultimately impacting the timeline for the project
Specialization allows your firm to streamline operations, leading to more predictable outcomes and fewer surprises during projects.
The challenge:
Finding the sector of your market currently untapped that aligns with your interests and/or experience.
Leveraging your experience to pivot into a targeted market
AEC specific considerations:
Architects: It’s hard to be everything for everyone. A fixed‑fee, multi‑stakeholder projects (e.g., civic, healthcare, education) reward a tight process and stakeholder management. A high-end custom home requires better emotional intelligence and connection with your client.
Engineers: Look at sectors needing specialized compliance (e.g., food processing, clean rooms, municipal utilities) where expertise shortens timelines.
Contractors: Consider repeatable project types (e.g., tenant improvements, light industrial, sustainable retrofits) where you can build vendor playbooks and predictable schedules.
Put It Into Practice
Hone your skills. By starting broad and then narrowing your focus, you find which areas are more financially suitable. Create effective structures and processes for your practice. Don’t try to be everything for everyone.
Look at what areas of your industry strike the most passion and joy for you. Leverage your experience to win more projects in that area, therefore growing your expertise.
Having a specialization allows your firm to streamline operations, therefore leading to more predictable outcomes with fewer surprises during projects.
Conduct reviews yearly. Establishing your niche isn’t a “one and done” decision—finding what works for you and your firm is an evolving journey.
Our Takeaway
When you focus on a clear niche, your operations run smoother, sales close faster, and margins get better. Don’t try to be everything to everyone—be the obvious choice for someone.
Think...
Fixed fee vs hourly: choose based on scope and risk.
Match cash to reality: your bills may land before the client’s funds do.
Big institutions lead to long timelines: think government/education—build a buffer into your price and schedule.
Remember, niching isn’t a “one and done” decision—it’s an evolving journey that grows with your firm and the market.
Want a second set of eyes on your setup? We’re happy to help you tune systems so they’re simple, scalable, and—most importantly—off your mind.
Helpful resource: Check out our recent blog diving deeper into this topic.
If you have any questions about getting started in this process or working with our Team, please reach out today!
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