RHACOVA

Job costing and profitability

Committed Costs and Cost-to-Complete During a Job

A purchase order you signed is money committed, even though no invoice has arrived. Ignoring it makes a job look healthy right up to the week it isn't.

The short answer

While a job runs, three cost figures exist at once: cost already incurred and recorded, cost you have committed to but not yet recorded as actual, and cost still to come. In RHACOVA, the forecast to complete covers everything still to come — open commitments included — and projected final cost is actual plus that forecast. Commitments are shown separately for control and are never added a second time. Watching only invoices received makes a job look healthy until the subcontractor bills arrive.

Definitions

Actual cost to date
Costs already incurred and recorded on the job — invoices received, payroll run, materials delivered — whether or not they have been paid. A recorded job cost is not a bill, a payment or a cash movement.
Committed cost
Money the business is already obligated to spend but has not yet recorded as an actual cost: a signed subcontract, an issued purchase order, a confirmed rental. RHACOVA shows open commitments separately, as exposure and control.
Cost to complete (forecast to complete)
Every remaining cost expected to finish the work, including commitments not yet recorded as actual, estimated from what is left to do — not from what is left in the budget.
Projected final cost
Actual + forecast to complete. An estimate of the final cost, explicitly still a projection.

The formulas

Projected final cost = actual cost to date + forecast to complete

Projected variance = projected final cost − baseline estimated cost

Projected profit = current contract value − projected final cost

The forecast to complete already includes open commitments. If you prefer to track commitments on their own line, the “still to do” part must leave them out — the same commitment can never be counted twice.

Worked example: a job in week three

Baseline estimated cost $30,000; contract value $40,000. At the end of week three the picture is:

  • Actual cost — invoices received and payroll run: $18,400
  • Forecast to complete, which includes: $19,500
    • Committed — signed electrical subcontract, not yet invoiced: $7,500
    • Committed — purchase order for fixtures, not yet delivered: $6,400
    • Still to come — two days of finish labor and disposal: $5,600
  • Projected final cost (actual + forecast to complete): $37,900

The $13,900 of open commitments is shown separately as exposure. It is already inside the forecast to complete; adding it again would inflate the final cost.

Read the invoices alone and the job has spent $18,400 of a $30,000 budget: comfortable. Read the commitments and the forecast is $37,900 against a $30,000 estimate — a projected overrun of $7,900 that is knowable in week three, while there is still time to act.

What is still unknown mid-job

Even with a good forecast, some figures are not facts yet. Comparing a partial actual cost of $32,300.00 against an estimate of $30,000.00 produces a cost variance of $2,300.00, but the final result stays open:

  • Expected profit at the estimate: $10,000.00
  • Final profit: unknown until final revenue is known

RHACOVA reports that gap as unknown rather than filling it with the estimated revenue. A projection you can see is useful; a projection dressed as a result is how a job surprises you at closeout.

Percent complete has to come from the work

Measuring progress by cost spent is circular: a job that overruns reports itself as further along precisely because it spent more. Base percent complete on remaining work — units installed, rooms finished, days of labor left — and let the cost comparison tell you whether that progress cost what it should have.

Common mistakes

  • Tracking only invoices received and calling it job cost.
  • Counting a change order's revenue in the projection before it is approved.
  • Leaving committed subcontracts out of the forecast until the invoice arrives.
  • Adding open commitments on top of a forecast to complete that already includes them.
  • Treating a mid-job projection as the final result — the distinction is the whole point of closing out a job properly and of estimate vs actual.

Quick answers

What is a committed cost?
A cost you have obligated the business to but not yet recorded as an actual cost: a signed subcontract, an issued purchase order, a confirmed rental booking.
What is forecast at completion?
In RHACOVA, projected final cost is actual cost to date plus the forecast to complete, which already includes open commitments — they are not added again. It is an estimate of the final cost, and it is explicitly not a fact yet.
Is percent complete a reliable measure?
Only if it comes from remaining work, not from cost spent. Cost-based percent complete reports a job as further along precisely when it is overrunning.

Run the numbers

Cost variance in dollars and percent, expected profit and margin, and final profit, profit variance and margin difference once a final revenue is known.

Open the Estimate vs Actual Calculator

Free, no account, and the answer stays on the page.

Let the job carry the forecast

RHACOVA Jobs hold actual costs, committed costs and a forecast against a frozen baseline, and report projected profit as the numbers land.

Open Jobs

How RHACOVA defines these terms

Every calculator, estimate and job in RHACOVA uses one set of financial definitions, and they are written down rather than implied. Read the RHACOVA methodology for the full list of definitions this article relies on.

Keep reading