Create a Job Costing and Profit Review Process

A. Finished-Project Specification

Quantity: one completed Job-Cost Comparison Worksheet for the sample project, one Variance Log with every identified variance and its cause and corrective action, one Lessons-Learned Record, and one periodic-review schedule with responsible owner and cadence, all dated and reviewed by the bookkeeper, CPA, estimator, and project manager as applicable.

B. Document Schedule (Component Schedule)

Document	Quantity	Format	Content Required	Preparation / Purpose
Job-Cost Comparison Worksheet	1 per active job	Multi-column cost-code table	Estimate, committed, actual, forecast, and variance by cost code, plus revenue, cash, and gross profit	The controlling comparison document referenced at every review
Variance Log	1 per job, ongoing	Log with running entries	Cost code, amount, probable cause, confirming source, corrective action, status	Tracks every identified variance from discovery to resolution
Lessons-Learned Record	1 per completed job	Structured summary	Findings by scope, estimating, production, supplier, subcontractor, customer, schedule, quality, and warranty category	Feeds approved updates back to Chapter 6 and Chapter 7
Periodic-Review Schedule	1, company-wide	Calendar with owners	Review cadence, responsible reviewer, and escalation threshold for every active job	Ensures review happens before, not only after, completion

C. Information Takeoff

• Estimate data: the locked Chapter 7 pricing worksheet for the sample project, including labor hours, material, equipment, subcontractor, overhead, and profit by cost code, gathered before Step 1.
• Contract data: the original contract value and the complete Chapter 10 change-order and allowance log to date, gathered before Step 2.
• Accounting data: posted payroll, material, equipment, subcontractor, permit, fee, delivery, and disposal cost from the Chapter 5 accounting system, current through a stated date.
• Commitment data: open purchase orders, subcontracts, and rental agreements not yet invoiced.
• Revenue and cash data: invoices issued, payments received, retainage withheld, and disputed amounts.

D. Acceptance Standards

Check	Standard
Estimate-to-actual comparison	Every cost code on the worksheet shows original estimate, committed cost, actual cost, forecast cost to complete, and variance
Labor reconciliation	Actual hours are reconciled to job, cost code, date, and supervisor, with no unassigned or unexplained time
Material and equipment reconciliation	Purchase quantity, use, waste, return, and credit are compared to estimated quantity for every material cost code reviewed
Variance documentation	Every variance beyond the company's approved threshold has a recorded probable cause, confirming source, and corrective action
Profit and cash separation	Forecast gross profit and cash position are calculated and reported as two distinct figures, never combined
Periodic review	At least one periodic review has been completed on the sample job before substantial completion, in addition to the final review
Lessons learned and feedback	Findings are categorized, and any proposed update to Chapter 6 or Chapter 7 is routed for management approval before it is applied

E. Import the Estimate, Contract, and Change Data

1. Confirm the job number, customer, contract, estimate revision, budget, schedule, cost codes, and accounting records. Record each identifier on the Job-Cost Comparison Worksheet header before importing figures.
2. Import original estimated quantity, labor hours, labor cost, material, equipment, subcontract, general conditions, overhead recovery, and profit. Enter each figure by cost code from the locked Chapter 7 pricing worksheet.
3. Import approved changes, allowances, alternates, credits, and current contract value. Enter each approved amount from the Chapter 10 change-order and allowance log and calculate the current contract value.

F. Create Committed-Cost and Actual-Cost Records

1. Create committed-cost records for purchase orders, subcontracts, rentals, and other obligations. List each open commitment by cost code with vendor, amount, and expected invoice date.
2. Create actual-cost imports for payroll, materials, equipment, subcontractors, permits, fees, delivery, disposal, and expenses. Import posted costs by cost code from the Chapter 5 accounting system through the stated data date.
3. Reconcile employee time to job, cost code, date, task, and supervisor. Match every timesheet entry to the job and cost code it was billed against.
4. Identify missing, late, or miscoded time. List each unresolved timekeeping entry and assign a responsible person to correct it before the review is finalized.

G. Compare Labor, Material, Equipment, and Subcontract Performance

1. Compare estimated labor hours with actual and remaining forecast. Enter estimated, actual-to-date, and forecast-remaining hours for each labor cost code.
2. Compare labor production by task and quantity, not only total hours. State the production rate achieved (quantity installed per hour) against the estimated rate for each measured task.
3. Compare estimated material quantity and price with purchase, use, waste, return, and credit. Enter estimated and actual quantity, unit price, waste, returns, and credits for each material cost code.
4. Compare equipment duration and utilization with estimate. Enter estimated and actual equipment days or hours and note idle or extended-use periods.
5. Compare subcontractor commitments, approved changes, invoices, retainage, and forecast. Enter the current subcontract value, invoiced amount, retainage withheld, and forecast final cost for each subcontract.
6. Compare general-condition duration and cost with schedule. Enter estimated and actual general-condition cost against the current schedule duration.

H. Calculate Revenue, Cash, Forecast, Variance, and Lessons Learned

1. Track customer invoices, payments, retainage, credits, disputed amounts, and receivable age. Enter each figure on the worksheet's revenue and cash section, separate from the cost section.
2. Separate profit from cash flow. Present forecast gross profit and net cash position as two distinct lines; do not combine them into one figure.
3. Calculate revenue earned, invoiced, collected, and remaining using the approved accounting method. Use the company's CPA-confirmed revenue-recognition method consistently across all four figures.
4. Calculate forecast cost to complete. Estimate remaining cost by cost code for all unperformed scope, using current production rates and pricing.
5. Calculate forecast final cost and forecast gross profit. Sum actual-to-date cost, committed cost, and forecast cost to complete for forecast final cost; subtract forecast final cost from contract value for forecast gross profit.
6. Calculate gross margin using a consistent formula. Divide forecast gross profit by contract value using the company's approved, documented formula.
7. Do not treat overhead recovery as net profit without full financial review. Label the overhead-recovery line separately from the profit line on the worksheet.
8. Identify variance by estimating error, scope change, customer delay, supplier price, labor productivity, waste, rework, weather, inspection, schedule, damage, or accounting error. Record the probable cause for each cost code showing a variance beyond the company's approved threshold.
9. Identify unapproved work and unbilled approved work. List any work performed without an approved change order and any approved change not yet invoiced.
10. Identify allowance overrun, credit, and remaining exposure. Cross-check each allowance's committed amount against its original amount from the Chapter 10 log.
11. Identify pending change exposure separately from approved revenue. List pending, unapproved changes and their potential value without including them in contract value.
12. Create threshold alerts for labor, material, subcontract, schedule, receivable, and margin variance. State the specific dollar or percentage threshold that triggers an immediate review outside the normal cycle.
13. Investigate variance promptly with field, estimator, procurement, accounting, and project management. Record who was consulted and what was confirmed for each variance investigated.
14. Create corrective actions for purchasing, staffing, sequencing, billing, change control, scope, or customer decisions. State the specific action, responsible person, and target date for each variance requiring correction.
15. Do not cut safety, quality, compliance, wages, or required warranty work to protect margin. Confirm no proposed corrective action reduces required safety, quality, compliance, wage, or warranty performance.
16. Complete weekly or periodic active-job reviews. Run the comparison worksheet on the schedule stated in the Periodic-Review Schedule, beginning at the first billing cycle.
17. Complete a substantial-completion review before final invoice. Run a full comparison at substantial completion and resolve open variances before the final invoice is prepared.
18. Complete a final job-cost review after all costs and credits are posted. Run the comparison a final time after every cost, credit, and change has been posted to the accounting system.
19. Reconcile final contract value, cost, gross profit, cash, receivable, payable, tax, and warranty reserve. Confirm every figure ties to the accounting system of record and record any remaining discrepancy with an explanation.
20. Create lessons learned by scope, estimating, production, supplier, subcontractor, customer, schedule, quality, and warranty administration. Complete the Lessons-Learned Record with a specific finding in each applicable category.
21. Update Chapter 7 pricing rates and Chapter 6 scope assumptions only after management approval. Route each proposed update through management review before it is applied to the controlled pricing worksheet or scope library.
22. Archive the final job-cost report and present portfolio trends to management. Store the completed worksheet, variance log, and lessons-learned record in the job file and summarize trends across jobs for management review.