Cost and value

One cut-off, or it is not a reconciliation

Value from the last certificate and cost from the ledger at month end are not two sides of the same project. They are two different projects being compared with each other.

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The date governs both sides

A CVR is a matter of judgement dressed as arithmetic, and the judgement that matters most is the cut-off. Get it wrong and the margin reported is wrong by whatever fell in the gap, in whichever direction happens to flatter.

QScope puts one date at the top of the period and applies it to both sides. Certified value to that date can be pulled straight from the certificates already issued, because that is the one figure the program does not have to guess.

  • One cut-off date per period, applied to value and cost
  • Certified value pulled from the certificates already issued
  • Work done but not certified and variations at settlement value, entered separately
  • Margin and margin percentage, period by period
Cost and value
Period to 30 Nov 26
Value
£1,284,000
Cost
£1,171,000
Margin
8.8%
Certified value£1,196,000
Done, not certified£42,000
Variations at settlement value£46,000
Value to the cut-off£1,284,000
Variations are carried at what you expect to settle at, not at what was applied for. The difference between those two is where optimism enters a margin.

Accruals and provisions, prompted

Cost incurred but not yet invoiced has to be accrued, or the cost side is understated and every job looks profitable until the post arrives. That is the mechanism behind most late margin collapses.

Carrying no provisions is not neutrality either. It assumes nothing will go wrong. QScope flags a period with accruals or provisions at nil, because both are far more likely to be an omission than a position.

  • Cost invoiced, accruals and provisions entered separately
  • Warning where accruals or provisions are nil
  • Movement against the previous period, with a prompt to explain it
  • Prints for internal reporting
Cost and value
Movement
Margin, period to 31 Oct£121,400
Margin, period to 30 Nov£113,000
Movement(£8,400)
Explanation recordedYes
A movement nobody can explain is the one that turns into a write-down later. The explanation is the report; the numbers are the evidence for it.

The client sees a cost report, not your margin

A CVR is an internal document. The client is never shown the margin on their job, and putting it in front of them is how a negotiation starts that did not need to.

The same figures drive a cost report that faces the client: anticipated final cost against budget, with no reference to cost or margin. One set of numbers, two audiences, kept apart on purpose.

  • Margin and cost stay internal, hidden from client guest links
  • Anticipated final cost against approved budget for the client
  • Variance stated as a figure, not signalled only by colour
  • Both printed on your letterhead, in black and white
Reports
Cost report to client
Approved budget
£1,400,000
Anticipated
£1,388,000
Variance
+£12,000
Certified to date£1,196,000
Committed, not certified£168,000
Risk allowance carried£24,000
Anticipated final cost£1,388,000

Where the margin is finally proven

Every period of a CVR is a forecast of the same thing: the margin at the end. The final account is where the forecast is settled and the estimating stops.

Variations carried at settlement value in the CVR become agreed figures in the final account, so the margin you reported month by month is tested against the adjusted contract sum rather than quietly abandoned.

  • Variations move from settlement value to agreed value
  • Provisional sums adjusted against what the work actually cost
  • Retention release shown explicitly on the value side
  • The last CVR reconciles to the final account
Final account
Statement to settlement
Original contract sum£1,352,000
Variations, approved+£46,000
Provisional sums adjusted(£12,000)
Adjusted contract sum£1,386,000
Less certified to date, gross(£1,196,000)
Add retention release+£29,900
Final balance due, excl VAT£219,900

The provisions in a CVR come from somewhere

Carrying no provisions assumes nothing will go wrong, which is why QScope warns on a nil period. The provision itself still needs a basis, or it is just a number that gets cut first.

The risk register quantifies each commercial risk as probability times cost, and the total feeds the provision in the CVR, so the figure protecting your margin can be defended line by line.

  • Each risk carries a cost, a probability and an owner
  • Allowance calculated as probability times cost, per risk and in total
  • Total allowance feeds the CVR provision
  • Closed risks stay on the record as the job de-risks
Risk register
Commercial risk and provision
RiskProb.Allowance
Ground conditions below slab30 %£11,400
Late structural steel delivery45 %£6,300
Client changes to M&E layout20 %£6,300
Asbestos in the annexe10 %Closed
Total allowance into the CVR£24,000
Questions

What surveyors ask before they start

Does QScope import my cost ledger?

No. The cost side is entered by hand and stays that way. The program has no access to your accounts, and pretending it did would be the worst possible choice in a report about margin.

Who is this for?

Contractors and subcontractors reporting internally. A client-side quantity surveyor reports the anticipated final cost instead, which is a different document with a different audience.

How often should I add a period?

One per valuation cycle is usual, so the cut-off lines up with something that already exists rather than a date chosen for the report.

Why does it warn me about nil provisions?

Because carrying none assumes nothing will go wrong, and that assumption is almost never deliberate. If it is deliberate, the warning costs you nothing.

Related

The rest of the commercial picture

Try it on your next valuation

Not your whole portfolio. One live job, one certificate. If it does not save you time the first time you use it, walk away and take your data with you.