Infrastructure contractors · Real estate and construction
Government contracts where every running bill is traced to the cash received
On a government contract the bill is measured, the payment is net of several deductions, and the difference is left to settle at final bill. We match each running bill to its measurement, its deductions and the cash released, and cost each site from its own records. The contractor then knows what is owed and what each work is earning.
In one paragraph
Contractors building roads, highways, bridges, irrigation, water supply and urban works serve central and state departments, municipal bodies and public-sector undertakings. Contracts are item-rate, EPC or annuity-based. Owners and finance heads deal with a client that pays on measurement and budget release. Equipment and fuel are a large part of cost, and eligibility for the next bid depends on how the accounts read today.
Managing partner or managing director, with the accounts head
The economics
How the money moves in this trade
Work is measured on site and recorded in measurement books, and a running account bill is raised. The department pays it after deducting income tax at source, GST at source where it applies, and the construction workers' welfare cess. It also deducts security deposit, recoveries for material and machinery supplied, and advances. Price-variation clauses adjust the bill for movements in material and fuel indices. Payment timing depends on the department's budget, so receivables can sit for long periods regardless of performance.
Cost is spread across scattered sites with their own stores, fuel, hired and owned equipment, sub-contractors and petty cash. Under the hybrid annuity model, the contractor forms a project company. The authority pays part of the project cost during construction and the rest as annuities over the operation period. That adds lender reporting and long-term revenue accounting. Bid capacity and pre-qualification rely on audited turnover, net worth and work done, so loose records cost the next contract as well as this one.
The problem
Where the numbers usually break down
Deductions are not reconciled to credits
Income tax and GST deducted at source by the department are recorded from the payment advice, but the matching credit in the contractor's tax records is checked late or not at all.
Security deposits and retention are lost track of
Deposits deducted from bills over several years are held by different divisions, and the release after the defect liability period depends on someone remembering to apply for it.
Price variation is claimed late or under-claimed
Escalation is due under the contract formula, but the indices and calculation sit with one engineer and claims are made in a batch, if at all.
Site cost is not captured by work
Fuel, equipment hire, owned-machine running cost and site staff are booked to the head office, so no work has a real margin and the cost of idle machinery is invisible.
Measured, billed and paid figures do not agree
Work measured, work billed and amounts received are held in three places, and the gap between them is understood only at final bill.
What we do
The work, and the result each part produces
Running bill reconciliation
Each bill traced from measurement to gross bill, every deduction and recovery, and the net payment received.
What the department owes is known bill by bill.
Tax deduction and credit matching
Income-tax and GST deducted at source by each department matched to the credits reflected in the contractor's tax records every quarter.
Deductions become usable credit rather than unclaimed balances.
Security deposit and guarantee register
Deposits, retention and performance guarantees recorded by work, division and release date.
Releases are applied for when due.
Price variation workings
Escalation computed each billing period from the contract formula and published indices, with claims tracked to payment.
Escalation due under the contract is claimed in full and on time.
Site-wise cost and equipment cost
Material, fuel, hired and owned equipment, sub-contract and site overhead booked by work, with machine utilisation reported.
Every work shows its own margin, and idle equipment shows its cost.
Bid-capacity and pre-qualification records
Turnover, work done and net worth maintained in the form tender documents typically ask for, from reconciled books.
Certificates for the next bid are prepared from figures that already agree.
Where we start
The first steps of an engagement
Bills, measurements and payment advices
We ask for the work orders, measurement book abstracts, running account bills, the department's payment advices and deduction certificates, and the site stores and fuel records.
Bill-to-cash reconciliation
Each running bill is traced from measured value to gross bill, every deduction and recovery, and the net payment. Income tax and GST deducted are matched to the credits in your tax records.
Deposit and escalation registers
Security deposits, retention and guarantees are recorded by work and release date, and escalation is computed for each billing period from the contract formula.
Receivables by department
The first report shows measured, billed and received value for each work, receivables aged by department and division, deposits due for release, and escalation due but not yet claimed.
How it is measured
The reports the work is judged on
Each is recorded as a baseline before the work starts, so later reports have an honest comparison.
- Measured, billed and received value, by work
- Receivables aged by department and division
- Tax deducted at source matched to credit available
- Security deposits due for release
- Price variation claimed against due
- Site margin and equipment utilisation, by work
Who it suits
Written for, and not the right fit for
- Your contracts are lump-sum turnkey work for private industrial clients; our EPC contractors page covers that.
- You need the CA certificate of turnover or net worth for a tender, or a statutory audit, on its own; those are signed by an independently engaged CA.
- Contractors executing roads, irrigation, water and urban works for government departments and public-sector bodies.
- Firms running several sites across districts or states with a small central accounts team.
- Contractors forming a project company for an annuity-based contract and needing lender-grade reporting.
Cities where this trade concentrates
Services
Services this work draws on
Outsourced accounting
Your books kept current and reconciled, closed to a published calendar.
Explore service ↗GST, TDS and tax compliance
GST, TDS and income-tax prepared from reconciled data, not a working file.
Explore service ↗Costing and profitability
What each product, line and customer really contributes.
Explore service ↗Internal audit
Independent process review that closes findings rather than filing them.
Explore service ↗Banking, funding and due diligence
Information a lender or investor can verify without a reconstruction.
Explore service ↗Every other service, also available in this trade
Common questions
Questions owners in this trade ask
We have dozens of running bills a year. Is reconciling each one worth it?
Yes, because the amounts that go unclaimed — escalation, deposits, deduction credits — are small per bill and large in total. Once the register is set up, each new bill takes very little time to add.
How should the project company for a hybrid annuity contract be run?
With its own accounts, lender reporting and schedules for construction-period receipts and annuities, which we set up and maintain. The accounting treatment of the concession should be confirmed with your statutory auditor.
Do you deal with the department on our behalf?
No. We prepare the reconciliations, claims workings and documents your team submits. Representation before the department remains with you.
5th Quadrant maintains contract and site accounts and prepares bill reconciliations, escalation workings and tender schedules. Certificates of turnover, net worth or work done, statutory audit and tax-audit reports are issued by an independently engaged chartered accountant, coordinated through 5th Quadrant. Full detail is on our Professional Scope page.
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