Keep four amounts visible
The project report should distinguish approved contract revenue, actual costs, remaining commitments and estimated costs to finish. These are related but different measures. An issued purchase order may be a commitment before it becomes an expense; a proposed customer variation may still be unapproved.
Use a change reference that appears on the quote, customer approval, supplier order and time record. The reference lets the office connect costs to their commercial reason without reconstructing the site manager's conversations at month end.
Illustrative example: lighting changes on a tenant improvement
A Calgary contractor has $120,000 of approved revenue and a projected $100,000 of direct costs, giving $20,000 of direct contribution before overhead, financing and tax. The customer approves an $18,000 lighting variation that adds $13,000 of expected direct costs.
The revised figures are $138,000 revenue, $113,000 direct costs and $25,000 direct contribution. The contribution margin rises from approximately 16.7% to 18.1%. If the additional labour estimate later increases by $6,000, projected contribution falls to $19,000, or approximately 13.8% of revenue. Approval of the sales price does not freeze the cost forecast.
Treat unapproved work as its own action
A further requested change should be shown separately until its status is resolved. The project manager needs to know who can approve it, what evidence is required and whether costs have already been incurred. Bookkeeping can identify the exposure, but it should not certify entitlement to collect a disputed amount.
For eligible Alberta construction projects, payment rights and timing depend on the governing rules and required documents. Preserve invoice-receipt dates and correspondence; obtain appropriate advice for disputes, notices and lien questions. A margin spreadsheet does not determine those rights.
Reconcile the project report to the ledger
At each close, compare direct costs in the project schedule with the accounting file. Explain shared allocations, late supplier invoices, credits and costs belonging to other jobs. The manager should date and approve the remaining-cost estimate so changes are visible next month.
Use the tools as a preliminary calculation aid, with the same definitions of revenue and direct cost. The final decision about pricing or taking another job should also consider the overhead burden, working-capital need, capacity and the reliability of the estimate.
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