Costing and margin control: from quote to forecast margin
Make the quote the budget, tag every cost to a project, and review forecast margin weekly. The chapter that decides whether you steer or just report.
- Quote BOM becomes the budget without retyping.
- Three costs: estimated, committed, actual. Three margins: quoted, forecast, final.
- Review forecast margin weekly, not at close.
- Price every change. Unpriced change is silent margin loss.
- Cost with no project ID is the leak.
Quick answer
Make the quote BOM the project budget, tag every purchase, labour day and expense with a project ID, and track three costs per project: estimated, committed and actual. Review forecast margin weekly. Price every change, pick one overhead allocation rule, and treat cost without a project as the leak to eliminate.
The model in four rules
- The quote is the budget. The BOM and labour plan in the quote become the project’s estimated cost. No retyping.
- Every cost carries a project ID. Purchases, labour, subcontractors, logistics, fees.
- Three costs, three margins. Estimated, committed, actual; quoted, forecast, final.
- Review forecast margin weekly, and explain any drop against the quoted margin.
From quote to margin
A worked scenario
In the illustrative example in why projects overrun, a Rs 40,00,000 contract with a Rs 34,00,000 estimated cost has a planned margin of 15%. Four unpriced items add Rs 3,00,000 and halve the margin to 7.5%. The numbers are assumed. The point is that each item looked small, and the loss was visible in committed cost long before the final bill.
Overhead and changes
- Overhead: choose a rule (a percentage of project cost, a rate per kW, or a rate per site day) and apply it the same way every time. Consistency matters more than the exact rule.
- Changes: log every scope or BOM change with a price and a decision on who bears it, including changes you choose to absorb.
Where to go deeper
- Project-wise costing and margin: definitions, the weekly review table and an illustrative cost structure.
- Why projects overrun: five drift sources.
- BOM control: the purchase side.
Do this first
Pick three live projects. For each, write quoted cost and committed cost to date. Compute forecast margin. If you cannot, the gap in your data is your first project.
Next: billing, cash flow and receivables. Back to start here.
Our own operating model; no outside figures. Examples use assumed numbers.
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