Two projects with identical spend to date can be in completely different positions. What has been spent is history; what remains to be spent decides whether the project still works.
Ask how a construction project is doing and the usual answer is what it has cost so far, compared with budget. That is a measure of the past. It cannot tell you whether the project still makes money, because that depends entirely on what is left to spend.
A project sixty per cent through its budget might be eighty per cent complete or forty. Those are opposite situations and the spend figure is identical in both.
Committed is not the same as invoiced
Cost recorded when an invoice arrives is cost recorded late. By then the material is on site, the subcontractor has worked, and the commitment was made weeks earlier by someone with authority to make it.
Capturing cost at commitment — the purchase order, the work order, the variation instructed on site — is what makes the position current rather than historical. Committed but unbilled cost is often the largest single difference between what the ledger says and what the project actually owes.
A project position built only from invoices received is a position that is always several weeks optimistic.
Reforecast on a cycle, not when something goes wrong
Cost to complete is an estimate, and it decays. Set at the start and revisited only when a problem appears, it arrives too late to change the outcome — which is the entire point of producing it.
- Measure actual progress
Physically, not by proportion of budget spent. Spend is an input, not an output.
- Reforecast the remaining cost
Against current prices and current productivity, not the rates assumed at tender.
- Include the variations
Instructed, agreed or disputed. A variation not in the forecast is a cost that will arrive anyway.
- Compare to the revised total
And to the contract value. The gap is the project's real margin, and it moves.
Retention runs in both directions
Retention withheld from subcontractors is money the business holds and will eventually pay. Retention withheld from the business by its client is money owed and frequently forgotten, sometimes for years after practical completion.
Both need tracking with the conditions and dates for release recorded. Retention receivable is one of the more commonly written-off assets in the sector, and it is written off for want of a schedule rather than for want of entitlement.
Cash and profit diverge, structurally
Construction spends ahead of milestone collections. A project can be genuinely profitable and unable to pay its subcontractors in a given month. That is not a warning sign; it is the shape of the business.
What makes it manageable is mapping cash phasing to milestones so the trough is visible before it arrives. A funding gap identified three months out is a conversation with a lender. The same gap discovered on the day is something else.