FreshBooks Project Profitability Tracking for Canadian Creative Agencies: A Step-by-Step Tutorial

Revenue does not tell you whether a project made money. A branding job that looked great at $10,000 can lose money once you count freelancer fees, stock assets, software, and your own hours. FreshBooks can show you that in one place, and it can do so while keeping your records ready for Canada Revenue Agency (CRA) purposes. This tutorial covers setup, expense tracking, billing, and report analysis, and it explains where federal rules end and provincial or territorial rules begin.

Assumptions: This article is written for a Canadian small creative agency, either a sole proprietorship or a Canadian-controlled private corporation (CCPC), that is or may become a GST/HST registrant. Where the answer depends on your province, structure, or plan, we say so.

Understanding Project Profitability

Project profitability is the money a project earns after you subtract every cost directly tied to it. For a creative agency, those costs usually include:

• Subcontractor and freelancer fees (illustrators, copywriters, videographers)
• Stock photography, fonts, music licences, and printing
• Software subscriptions allocated to the job
• Employee or owner labour
• Client-related travel and meals

The key tax point is that GST/HST you collect is not your revenue. You collect it on behalf of the government, and it is generally remitted to the CRA (or to Revenu Québec for Québec-based registrants). Profitability should be measured on pre-tax amounts. Likewise, if you are a GST/HST registrant, the GST/HST you pay on business expenses is generally recoverable through input tax credits (ITCs), so it should not count as a project cost. Confirm your eligibility with the CRA, because some expenses, such as meals and entertainment, are restricted.

FreshBooks supports this with projects, time tracking, expense tracking, invoicing, and reporting. Which of these features you get, including project-level profitability reporting, depends on your plan. Check FreshBooks’ current plan comparison and pricing in CAD before you choose.

Step 1: Setting Up FreshBooks for Your Creative Agency

Choose a plan and set your currency

Pick a plan based on the number of billable clients you have, whether you need team time tracking, and whether you need project-level reporting. Set your business currency to Canadian dollars (CAD). If you bill US or other foreign clients, FreshBooks can invoice in other currencies, but your CRA reporting is generally in CAD, so confirm how you convert foreign amounts with your accountant.

Configure sales taxes

Tax setup is where Canadian agencies most often go wrong. These are the main layers:

• Federal GST: 5% (verify on the CRA website).
• HST: a combined federal and provincial rate in participating provinces. Rates differ by province, so verify the current rate for each province you bill into.
• PST: a separate provincial tax in some provinces, administered by the province, not the CRA. Whether your design or creative services are subject to PST varies by province. Check with the provincial ministry of finance.
• QST: Québec’s tax, administered by Revenu Québec. Québec-based registrants generally deal with Revenu Québec for both GST and QST.

You must register for GST/HST once you exceed the small supplier threshold, currently $30,000 in revenue over four consecutive calendar quarters (verify with the CRA). You can also register voluntarily. Do not charge GST/HST until you have a registration number, and enter that number in your FreshBooks business profile so it appears on invoices.

The rate often depends on the place of supply, meaning where the service is deemed to be supplied, which is not always your own province. Services supplied to clients outside Canada may be zero-rated in many cases. Verify the rules for your situation using CRA guidance on place of supply.

Step 2: Creating and Managing Projects

1. Create a client record with the legal business name, billing address (including province), and contact details. The province matters for tax.
2. Create a project for each engagement and link it to that client.
3. Set the billing method: hourly rate, flat project rate, or service-based rate.
4. Add a budget in hours or dollars, so you can measure overruns later.
5. Invite team members or subcontractors to log time if your plan allows it.

FreshBooks offers integrations with other apps. Check its current integrations directory to see whether your project management, payment, or design-related tools connect. Don’t assume a specific integration exists.

Step 3: Tracking Expenses

Record every project cost, attach a receipt photo, and assign each expense to its project. Keep your category names consistent with how you report income to the CRA. Sole proprietors report on Form T2125 (Statement of Business or Professional Activities), and corporations report on the T2 return with financial statements. Typical categories include advertising, subcontracts, office expenses, supplies, meals and entertainment, professional fees, and software.

Several tax points apply:

• Meals and entertainment: generally limited to 50% for income tax and ITC purposes. Verify current CRA rules.
• Equipment: a laptop or camera is generally a capital asset claimed through capital cost allowance (CCA), not a full one-time expense. Track it separately from project costs.
• Subcontractors: keep their invoices and GST/HST numbers. If you pay them for services, you may have T4A reporting obligations above a threshold (currently $500 for fees for services, verify with the CRA).
• Disclaimer: The content on this website is AI-generated for informational and educational purposes only. It does not constitute certified financial, tax, or legal advice. Because accounting standards and local tax codes vary frequently, readers should consult a qualified accountant or certified professional before making any financial decisions based on this material.