Subcontractor Scrutiny: Financial Due Diligence for Smooth Project Delivery

 By your friendly Canadian bookkeeper at Dirt ’n’ Dollars—where we track every dollar so you don’t have to sell your truck to cover surprise invoices 🇨🇦📋🧱

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Let’s talk about subcontractors. You know, those magical creatures who appear on site with their own tools, their own crews, and—if you’re lucky—a vague idea of your timeline.
Some are legends. Others are, well… less legendary.

But before you hand over a deposit and let them loose with your client’s kitchen reno, there’s something every savvy contractor (and every sleep-deprived bookkeeper) needs to remember:

Subcontractor financial due diligence is not optional. It’s survival.

Welcome to Subcontractor Scrutiny: The Prequel to Your Sanity. Because we all know—nothing ruins a good build like a bad bill.

🚩 The Risk Is Real, Folks

Hiring a subcontractor without vetting them is like building a deck without checking if your drill has a battery.
Sure, it might work out.
Or… it might collapse halfway through a client walkthrough while you’re trying to explain how "This was all part of the design."

Here’s what’s at stake when you don’t do your homework:

• Blown budgets
• Delays that make molasses look speedy
• Surprise invoices that show up like raccoons at a campsite
• CRA drama if your sub isn’t properly registered or remitting HST (aka audit bait)
• Worst of all? A dent in your reputation, which no spreadsheet can fix

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💸 Financial Red Flags You Don’t Want on Your Job Site

Here’s a handy guide to spotting subs who might not be ready for prime time (or even lunchtime):

1. “All Cash, Bro”
   If your sub insists on being paid entirely in cash and suspiciously avoids eye contact when you mention receipts, it’s a no from me.
2. “Lost” Business Numbers
   No GST/HST registration number? No WSIB coverage? No dice. If they’re not compliant, that risk lands squarely on your clipboard.
3. Chronically Late Invoices
   Sure, it’s only one invoice. But if they can’t keep their billing straight, chances are their project timelines are held together with drywall tape and prayer.
4. “My Cousin Does Taxes” Energy
   If their bookkeeping system is a shoebox and a Sharpie, you might want to run—don’t walk—to your next candidate.

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🕵️‍♂️ The Due Diligence Checklist (Bookkeeper-Approved!)

Here’s what I tell all my construction clients to check before they sign that subcontractor agreement:

✅ GST/HST registration
✅ WSIB account in good standing
✅ Proof of insurance (liability, not just good vibes)
✅ Trade license where required
✅ Up-to-date W9 or T5018 (if you’re feeling extra organized)
✅ References or portfolio of past jobs
✅ Ability to provide proper invoices (bonus points if they use actual software and not napkins)

AND—this one’s big:

✅ A signed subcontractor agreement that includes payment terms, scope, and what happens if things go sideways (like that one staircase build in '22… we don’t talk about it).

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💼 Why Your Bookkeeper Cares

You might think I’m just here to reconcile your Visa statement and nag you about receipts, but I love subcontractor due diligence. Why?

Because every red flag you ignore becomes my problem during year-end.

Like when:

• You paid a guy $14K in cash and now the CRA wants details
• A sub ghosts and your client wants a refund
• You forgot to get a T5018 and now your tax prep is delayed and your coffee budget is destroyed

So do it for yourself—but also do it for your stressed-out bookkeeper who just wants to help you make money without needing a lawyer.

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🧠 Pro Tips from the Ledger Lounge

• Use digital payment systems like Plooto or QuickBooks Payments—trackable, reconcilable, and no “I lost the e-Transfer email” drama.
• Keep everything in writing. Texts don’t count. Neither do vague promises scribbled on plywood.
• Treat your subcontractor onboarding like hiring staff. You wouldn’t let someone build a load-bearing wall without checking their skills, right? Same goes for their finances.

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Final Word: A Clean Sub Means a Clean Close-Out

A solid subcontractor is worth their weight in galvanized screws. But only if they’re as buttoned up on paper as they are with their power tools.

So ask the awkward questions. Request the paperwork. Double-check the numbers.

It’s not micromanaging—it’s running a smart business.

Because at the end of the day, when the job wraps up and the client is thrilled, you want your books to be just as solid as your foundation. And that, my friends, is how you build more than just walls—you build profit.