ERP for Contracting: Costing a Project You Cannot See

The unit is the project, not the invoice

Every purchase order, delivery note, wage hour, subcontractor claim and invoice belongs to a project, and any that does not is a cost you cannot attribute later.

Materials issued informally, plant moved without a record, staff time allocated from memory: their sum is the gap between the margin you quoted and the margin you got.

Committed cost is the number that matters

Contractors usually know what they have spent. Far fewer know what they have committed — purchase orders raised but not invoiced, subcontracts awarded but not claimed, variations instructed but not priced. Spend tells you about the past; commitment tells you whether the project is still profitable.

So the system has to record the commitment the moment it is made, and cost-to-complete moves with the decision rather than weeks later with the paperwork.

Progress billing and retention

Revenue is recognised against assessed progress, so the system has to hold both sides — claimed and certified — because the gap between them is a live commercial position, not a data-entry error. Retention is earned money, not in your bank, released per project on its own dates.

• Claimed versus certified per valuation, with the difference visible rather than netted away
• Retention held per project, with its own release dates
• Variations tracked from instruction to agreement to certification
• Advance payments and their recovery schedule against future valuations
• Cost to complete, updated from commitments rather than from invoices

Subcontractors are a liability position, not a supplier list

A subcontractor has a contract value, a work programme, its own retention and back-to-back liability for defects. Treated as ordinary payables, all of it is lost — and the common failure is paying one in full while their work still carries defects liability you are exposed to.

Own equipment needs an internal hire rate

No invoice arrives when your own excavator works your own site, so the project looks cheaper than it was. Charge the project an internal hire rate and credit the plant account: the project margin and the equipment's own economics both become visible.

What to implement first

Purchasing and project cost allocation. Until every cost carries a project code when it is incurred, no report on top of it means anything, and adding valuation or payroll modules first produces faster wrong answers.