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10. Where the profit came from, and lessons
Back to the case study · Previous: 9. Close-out and reports
10.1 The profit bridge
| AED | Where it came from | |
|---|---|---|
| Planned profit at tender | 500,000 | Contract 1,850,000 less tender budget 1,350,000 (chapter 4) |
| Joinery ordered above budget | -25,000 | Seen the day the order was placed (chapter 4) |
| Gypsum ordered above budget | -4,500 | |
| Painting ordered above budget | -2,000 | |
| Design, site, flooring and electrical below budget | +9,680 | 1,000 + 2,000 + 3,680 + 3,000 |
| Margin on variation CO-001 | +67,000 | 165,000 price less 98,000 cost, approved before work (chapter 7) |
| Actual profit | 545,180 | 27.1% of the final contract of 2,015,000 |
The company finished AED 45,180 (9%) above its planned profit, even though its subcontract orders came in AED 21,820 over budget.
10.2 The eight controls that made the difference
| # | Control in OSERP | Chapter | What it protected or added |
|---|---|---|---|
| 1 | Agreement accepted online with an emailed code, fingerprinted | 3 | No scope dispute. Exclusions and optional items in writing. |
| 2 | A 20% advance in the payment schedule, invoiced on signing | 3, 8 | The first two months funded by the client. |
| 3 | Commitments against budget the day orders are placed | 4 | A 21,820 overrun seen five months before the last bill. |
| 4 | Client approval of drawings by revision, with reasons | 5 | A layout change cost one drawing revision, not demolition. |
| 5 | Claims certified on measurement, dated to the valuation | 6 | 28,520 not paid ahead of the work; cost in the right month. |
| 6 | Retention held on every subcontractor payment | 6 | 67,484.55 behind the quality of the work for 12 months. |
| 7 | Variations priced and approved by the client before work | 7 | 67,000 of margin; the overrun absorbed more than twice over. |
| 8 | Revenue recognised by progress every month | 8 | The true margin visible every month, not only at close. |
None of these needed a consultant or custom configuration. They are the standard screens of the Projects module with the interior design industry pack.
10.3 What it was like for each party
- The family followed the whole job on the company's website: one login, every decision recorded, every invoice and document in one place. They never had to ask where things stood, and they approved the extra work knowing its price.
- The subcontractors claimed online, saw exactly what was certified and why, and could see their payments and retention without calling the accounts team.
- The project manager ran the job from one window: fifteen tabs, from the work plan to the final margin.
- The owner saw the real margin every month, and at the end compared this job with the tower project on one report.
10.4 Checklist for your own project
Before the client signs:
- [ ] Project created in Draft, with the customer and the project manager on the Overview tab.
- [ ] Structure built with one task per trade or subcontract, sign-offs marked, billable tasks ticked.
- [ ] Schedule dated and linked, baseline set.
- [ ] Top risks in RAID with owners and responses.
- [ ] Agreement with included, excluded and optional items, a payment schedule that adds up to 100% (with an advance and retention where you can), and a variations clause.
- [ ] Agreement issued, client invited with Accept and approve (and Pay invoices online if you take payments).
When the client accepts:
- [ ] Apply to the billing plan; invoice the advance.
- [ ] Move to Released; enter the tender budget on each task.
- [ ] Place service work orders tagged to their tasks, with retention for the trades.
- [ ] Check the Budget tab: anything over gets a response now.
- [ ] File and accept each subcontractor's trade licence and insurance; invite their people to the portal.
Every month:
- [ ] Certify claims on measurement, dated to the valuation.
- [ ] Put drawings, milestones and every change to the client in the portal before the work.
- [ ] Record a progress reading (cost to cost, with an honest forecast) and recognise revenue.
- [ ] Publish an update to the client.
- [ ] Raise the invoices that have fallen due.
At handover:
- [ ] File the snag list and handover documents for the client.
- [ ] Record actual dates on the schedule; close the RAID log.
- [ ] Final progress reading with the forecast equal to the actual cost; recognise.
- [ ] Technically complete -> Settle -> Closed.
- [ ] Diary the release of retention, both the client's and the subcontractors', at the end of the defects period.
10.5 Exercises
Use the figures in this case study.
- On 15 April the Budget tab showed the joinery task at 345,000 committed against a budget of 320,000. What does Available show for the task, and what does Used show?
- The flooring subcontractor claimed 2,760 sq ft of marble at AED 62. The company certified 2,300 sq ft. What was the certified amount, and how much was held back until the next claim?
- The flooring bill BILL-2026-00142 totalled AED 149,730 with VAT, and the order carries 5% retention. How much was paid to the subcontractor, and how much was withheld?
- At 31 May the job had incurred 244,400 of cost against a forecast of 1,374,000, on a contract of 1,850,000, and the family had been invoiced 555,000. What percentage was complete, how much revenue was earned, and was the position a contract asset or a contract liability, of how much?
- Why can a project be over its cost budget (CPI below 1) and still finish above its planned profit?
- Name two things the client never sees on the portal.
- A subcontractor's insurance expires halfway through the job. What happens when they make their next claim, and what must the company do?
- The family asks for an extra wardrobe on site and the foreman agrees. What should the project manager do in OSERP before the joiner makes it?
Answers
- Available = 320,000 - 0 cost - 345,000 committed = -25,000 (over). Used = 345,000 / 320,000 = 107.8%.
- 2,300 x 62 = AED 142,600 certified. 460 sq ft, AED 28,520, was held back until the next claim.
- Retention 5% of 149,730 = 7,486.50 withheld; 142,243.50 paid.
- 244,400 / 1,374,000 = 17.79% complete. Earned = 17.79% x 1,850,000 = 329,115. Invoiced (555,000) exceeds earned, so a contract liability of 555,000 - 329,115 = 225,885.
- Because CPI measures cost against budget only. Profit also depends on revenue: an approved variation raised the contract value by more than the extra cost and the overrun together.
- Any two of: cost, budget, margin, the estimate at completion, subcontractor orders, internal documents (anything not ticked Client sees).
- The claim can be made, but it cannot be certified until a current insurance certificate is filed and accepted. The supplier is flagged Expired on the Suppliers tab and in the Supplier compliance report. The company should obtain and accept the renewal before certifying, and should not pay direct bills to that supplier in the meantime.
- Record it on the Changes tab with its price and cost impact, submit it, put it to the client as a Variation in the portal, wait for the client's approval (confirmed with an emailed code), then approve it in OSERP and order the extra joinery against the budget supplement.