Project cost control: tracking BTP site margin during the works

Quick answer. To control the margin of a construction project in progress, constantly compare budgeted and actual figures (cost incurred against budget), calculate the percentage-of-completion margin, and cross it with the cash generated by interim payment statements. A project that looks profitable on paper can run a cash deficit if the invoiced progress lags behind the cost progress.

A project margin is not something you observe at handover. It is decided every week, through the hours logged, the materials delivered and the statements issued. When a French construction owner waits until year-end close to discover the real profitability of their jobs, it is already too late to react. This article deals with in-progress project control: tracking the gap between budgeted and actual, calculating a reliable percentage-of-completion margin, and anticipating the cash-flow lags specific to works contracts.

We do not cover here the general accounting mechanics of the construction sector, addressed in our guide to BTP accounting. The angle is operational: turning your site data into management decisions.

The quote freezes an assumption: a volume of hours, a purchase price for materials, a subcontracting rate, a duration. The project, however, is alive. Bad weather adds days, a client change order shifts the schedule, a supplier revises its prices, a crew under-logs or over-logs hours. The gap between expected and actual margin builds up day after day, often without any warning signal.

In construction files, the most frequent sticking point is not the margin calculation itself, but the absence of an up-to-date benchmark. The owner knows their invoiced turnover, rarely their cost incurred in real time. As a result, the drift is observed on the final invoice, when the lever for action has already disappeared.

Three margins not to confuse#

Useful control sits on the middle line. The budgeted margin is a target, the actual margin is a fact; only the percentage-of-completion margin lets you correct while the project is still running.

The percentage-of-completion method consists of recognising the turnover and profit of a project at the pace of its execution, rather than at delivery. The completion percentage is most often measured by the ratio between costs incurred to date and the total cost estimated at completion.

In practice, you constantly compare two figures: where the actual costs stand against the revised total budget, and where the invoiced turnover stands against the contract price. The gap between these two paces reveals both profitability and the cash position.

A regulatory point to know#

The percentage-of-completion method and the completed-contract method are described by the French general accounting plan (PCG) for long-term contracts. Whichever method is used, the PCG imposes a prudence principle that is decisive for the construction sector: the probable overall loss on a long-term contract must be provisioned as soon as it is known, after deduction of losses already recorded (PCG, article 622-6). The PCG also specifies that a loss on a contract must be provisioned as soon as it becomes probable (PCG, article 322-9).

In other words, a project whose cost at completion exceeds the selling price cannot wait until handover to carry its loss on the balance sheet: it is provisioned as soon as it becomes probable. This is exactly what percentage-of-completion tracking allows you to detect early.

Here is the sequence we set up with the construction firms we support.

1. Frame the reference budget. Take the signed quote and break it down into major cost blocks: labour, materials, subcontracting, equipment, site overheads. This is your comparison base.
2. Collect the actuals every week. Hours logged per project, supplier invoices allocated, subcontractor statements, equipment rentals. Without analytical allocation per project, no tracking is possible.
3. Re-estimate the cost at completion. At each review, update the cost to complete. The initial budget is no longer the truth from the first change order onward.
4. Calculate the percentage-of-completion margin. Compare costs incurred against revised total cost, and invoiced turnover against revised selling price.
5. Cross with cash flow. Compare the invoiced progress (statements issued and collected) with the spending progress. This is where the cash risk hides.
6. Trigger the arbitrage. If the percentage-of-completion margin drops by more than a few points against the budget, identify the cause (hours, purchases, uninvoiced change order) and act.

Simplified worked example#

In this example, the project remains profitable, but the margin has shrunk from 20 % to 12 % at the halfway point, and 88,000 euros of costs are incurred for only 80,000 euros invoiced. The job is still in the black, but it consumes cash. Without tracking, these two signals would go unnoticed until close.

A project can be profitable and still suffocate the company. Construction advances labour, materials and subcontracting before collecting, and several mechanisms specific to works contracts widen the gap.

The interim payment statement#

An interim payment statement is a costed progress report, drawn up at a given date, used as the basis for interim invoicing. It allows collection during execution rather than at the end. But a poorly paced statement, validated late by the project manager or disputed, delays the collection by several weeks while the spending continues.

The retention#

On a private works contract, the client may apply a retention capped at 5 % of the works amount, released at the end of a one-year period after handover (Law no. 71-584 of 16 July 1971). This retention cuts into the project's immediate cash: the accounting margin is earned, but a fraction of the cash only arrives a year later, unless you provide a substitute bank guarantee.

VAT reverse charge in subcontracting#

Construction works carried out by a subcontractor for a taxable customer fall under the VAT reverse charge between construction firms (French tax code, article 283, 2 nonies). This changes the cash profile: the subcontractor invoices without VAT, the main contractor declares it. Mishandled, this mechanism creates invoicing errors and adjustments. We detail this point in our article on subcontracting invoicing.

There is no need to multiply spreadsheets. On construction files, three indicators are enough to control a project in progress, alongside the financial KPIs of a BTP company tracked at the overall level.

The third is the most structuring: a cost at completion that exceeds the selling price is the signal of a probable loss to provision without delay.

Should you control margins on a spreadsheet or invest in a project management tool? Both options are legitimate depending on size and number of jobs.

• The spreadsheet suits a firm with few simultaneous projects and a rigorous owner. It is flexible, free, but fragile: a broken formula or a missed entry distorts everything, and history is lost.
• A dedicated tool or a structured analytical feed becomes essential as projects multiply. Analytical allocation per project in the accounting, combined with a dashboard, makes tracking reliable and saves time. A pilotage through an outsourced finance director or Power BI reporting then makes full sense.

Our recommendation: start by structuring analytics per project, whatever the tool. Without properly allocated data, even the best tool stays empty.

• Project with many change orders. Re-estimate the budget at each signed change order and check that it is actually invoiced. An executed but uninvoiced change order is an invisible lost margin.
• Public procurement. The rules on retention, advances and payment terms differ from private contracts; cash planning must be adapted to the specifications.
• Heavy subcontracting. Tracking subcontractor statements and the VAT reverse charge becomes a risk area in its own right, to be checked at each statement.

• Margin is controlled during the project, not at handover: constantly compare budgeted and actual.
• The percentage-of-completion margin, based on the ratio of costs incurred to total estimated cost, is the only indicator that lets you correct in time.
• A profitable project can consume cash if the invoiced progress lags behind the cost progress.
• The probable overall loss of a contract must be provisioned as soon as it becomes probable (PCG, articles 322-9 and 622-6).
• Retention (5 %, one year, Law no. 71-584 of 16 July 1971) and the VAT reverse charge in subcontracting weigh on project cash flow.
• Structure analytics per project first: the tool is only worth the quality of the allocated data.