Forecasting the final account: building the monthly CVR, and reading over- and under-recovery before the money has gone

Published 3 October 2026 · VariationFlow

How a UK specialist subcontractor’s QS or commercial manager forecasts the final account month by month: building the CVR from cost heads, accruals, work in progress and provisions, setting the forecast final value and cost, reading over- and under-recovery head by head, and the traps that flatter a margin, starting with unagreed variations counted at the value submitted.

At month six a mechanical subcontractor’s CVR on a £1.2m package shows a margin of 12.4 percent, against the 11 percent it was priced at. Value is £600,000: £540,000 certified and £60,000 of work in progress. Cost is £525,600, straight from the ledger. Two corrections take it apart. Of the work in progress, £40,000 is variations carried at the value submitted: £25,000 instructed in writing, which the QS expects to settle at £20,000, and £15,000 done on a site manager’s word with nothing in writing. And £22,000 of pipework and fittings has been delivered to site and not yet invoiced. Carry the instructed variations at £20,000 and the unconfirmed ones at nil, accrue the materials, and value is £580,000 against a cost of £547,600: a margin of 5.6 percent. The job did not lose 6.8 points that month. It never had them.

Forecasting the final account is the same exercise run forward to the end of the job. This guide is for the QS or commercial manager at a specialist subcontractor who builds the monthly CVR: how it is put together, how the forecast final value and cost are set, what over- and under-recovery mean head by head, and the habits that make a CVR report what the QS hoped rather than what is true. What the report is, and why it measures margin rather than cash, is in the guide to the CVR.

What does forecasting the final account mean on a subcontract?

Forecasting the final account means estimating, every month, the figure the subcontract will finally settle at (the forecast final value) and what the work will have cost by then (the forecast final cost), so that the margin the job is heading for is known while there is still time to change it. The forecast final value is the subcontract sum adjusted for everything that will move it: variations, remeasurement, dayworks, any loss and expense or compensation events you are entitled to, and any discount the payer is allowed to take. The forecast final cost is the cost to date, plus everything incurred and not yet invoiced, plus provisions, plus the cost to complete. The difference is the forecast margin, and the CVR is where it is set, and tested every month against the margin actually earned.

How is a monthly CVR built?

In the same order every month, from a fixed cut-off date, because each step is checked against the one before it.

1. Fix the cut-off. Value and cost run to the same date, usually the valuation date. A CVR that takes value to the 25th and cost to the 31st reports six days of cost with no value against them.
2. Take the certified value from the latest payment notice, gross, before retention. Retention is money held, not value lost, and a CVR that nets it off understates the job by the retention percentage every month.
3. Note the applied value beside it. Applied less certified is under-certification: it is value only as far as you can substantiate it, and it is the first list of what to chase.
4. Measure the work in progress: work done since the last application’s cut-off, and variations done and not yet valued, each at the value you can substantiate rather than the value you would like.
5. Make the value adjustments: negative where the valuations have run ahead of the work behind them or a variation is disputed, positive only where income has been earned and sits nowhere else.
6. Take cost to date from the ledger, by head: labour, plant, materials, your own subcontractors, preliminaries and other.
7. Accrue, head by head, everything incurred by the cut-off and not yet in the ledger: goods received and not invoiced, hire that has run and not been billed, labour worked and not yet through payroll, and work your own subcontractors have done and not yet been valued for.
8. Provide for what the job will bear and has not yet paid: defects you will have to make good, a contra-charge that has been threatened, delay damages you are exposed to.
9. Compare the margin earned to date with last month’s and with the forecast margin, and only then update the forecast.

Why split cost by head?

The usual heads are labour, plant, materials, subcontractors, preliminaries and other. The point of the split is not tidiness. A margin fading on one head and recovering on another nets to a number that looks steady, and only the split shows, say, labour running a fifth over its priced outputs while a saving on materials hides it. Where the tender was priced as a bill of quantities, map each section of the bill to the head its cost will fall under, give each a target cost, and the tender becomes a budget per head: what that part of the job was priced at and what it was expected to cost, on one side, and what it has cost, on the other.

Accruals, work in progress and provisions: where do they go wrong?

• Accruals are cost incurred and not yet invoiced. A missing accrual always flatters: the month the invoice is late looks profitable and the month it arrives looks like a loss. Build accruals from goods received notes, hire registers and timesheets, not from the invoices you happen to be expecting.
• Work in progress is value earned and not yet applied for. It should be modest and it should turn over: what was work in progress at the end of one month should be in the next application. Work in progress that grows three months running is either work nobody is applying for or value that is not really there, and both are a conversation with the site.
• Provisions are for liabilities the job will bear and has not yet paid. Review each one every month and release it the month the risk goes. A provision never released is margin never reported; a provision never made is a loss reported late.
• Materials on site sit on both sides of the report. If unfixed materials are in the valuation, their cost belongs in the CVR too, accrued if the invoice has not arrived. Value without the cost behind it is the opening example’s mistake in another form.

How do you set the forecast final value?

Build it up from the subcontract sum, line by line, each line at the value you expect to be paid rather than the value you have asked for. On the job in the opening example:

• Subcontract sum: £1,200,000.
• Variations agreed: £18,000, at the agreed figure.
• Variations instructed in writing and not yet agreed: £25,000 submitted, carried at £20,000, the figure the QS expects to settle at.
• Variations done without a written instruction: £15,000 submitted, carried at nil until the instruction is confirmed, and listed beside the forecast as an opportunity.
• Loss and expense or compensation events: carried only where the notice was given in time and the claim has been priced, at the figure you would settle for. Anything else is an opportunity, not value.
• Discounts and contra-charges: deducted where the order allows the contractor a cash discount, and where you have accepted a charge.

That gives a forecast final value of £1,238,000. The opportunities sit beside it, named and priced, so whoever reads the report can see what the forecast leaves out and why.

And the forecast final cost?

Cost to date, accruals and provisions, plus the cost to complete, estimated from what is left to do at the rates the job is actually achieving. The trap is the shortcut: taking the tender allowance still unspent as the cost to complete. That assumes the rest of the job will go exactly as priced, which is the one thing the first half has already shown it will not. Re-estimate the remaining labour from the outputs measured so far, the remaining materials from the quantities left and the prices now being paid, and the remaining preliminaries from the forecast completion date, not the programmed one.

On the example job, cost to date with accruals is £547,600 and the re-estimated cost to complete is £600,000, of which £27,000 is six weeks of preliminaries beyond the programmed completion at £4,500 a week. The forecast final cost is £1,147,600 and the forecast margin is £90,400, or 7.3 percent, against 11 percent at tender. That is the figure to take to the director, with the reasons beside it.

What do over-recovery and under-recovery mean in a CVR?

Recovery is the value a contract has earned against a part of its cost. A cost head is over-recovered when the value it has earned so far is more than it has cost, and under-recovered when it has cost more than it has earned. Read each head against the tender rather than against zero: a head is meant to earn the margin priced on it, so one that is only breaking even is already underperforming. Applied to the whole job, over-recovery usually means the valuations have run ahead of the work, which is certification in advance, not margin, and it reverses. The phrase has a third use, in a firm’s accounts rather than on a contract: overhead recovery, where the jobs together contribute less than the business costs to run. This guide is about the first two.

Preliminaries in delay

Take preliminaries priced at £4,500 a week over a 30-week programme, £135,000 in all, and valued in proportion to the work done rather than by the week. At week 20 the job is half complete. The preliminaries have earned half their value, £67,500, and cost twenty weeks, £90,000: they are under-recovered by £22,500, and the job is five weeks behind, because half the work should have taken fifteen. At that rate it finishes ten weeks late and the preliminaries under-recover by £45,000 by the end.

What to do depends on whose delay it is. If the main contractor caused it, through late access, other trades or late information, the under-recovery points to a claim, measured on what the delay actually cost, and the claim depends on the notice: on the NEC4 subcontract a compensation event has to be notified within seven weeks of becoming aware of it under clause 61.3, a period Z clauses often shorten, and other standard forms require notice at the time, some as a condition of the entitlement. If the delay is your own, it is a cost, and the forecast final cost carries it now rather than at the end.

Labour and outputs

Labour under-recovers when the outputs on site are below the outputs priced. Before treating it as productivity, look for the cause. Work done out of sequence, areas handed over late, a revision that meant installing twice: each is disruption caused by someone else, and each is hard to recover unless it was recorded at the time, in the site diary and on signed daywork sheets, against the instruction or the event that caused it. Whatever is genuinely your own goes into the cost to complete at the outputs actually being achieved.

Over-recovery is usually timing

An item certified ahead of the work behind it, such as design or set-up paid in full in the second month, or a front-loaded schedule of values, makes the job look ahead. It is not margin. Carry a negative value adjustment so the value reflects the work actually done, and know the month it reverses, because the later items will then be valued below their cost. And a head that looks over-recovered for no reason anyone can name is worth checking for a missing accrual before anyone reports it as a saving.

Which habits flatter a CVR?

• Unagreed variations counted at the value submitted. A variation is value only at what it will be paid at. Carry agreed variations at the agreed figure, instructed and unagreed ones at the realistic settlement, and work done without a written instruction at nil until the instruction is confirmed. The first two are value. The third is an opportunity, and the action it calls for is getting the instruction confirmed in writing, not putting it in the forecast.
• The wish-list forecast. A forecast final value made of the subcontract sum plus every variation ever submitted assumes every one is paid in full, and a forecast built that way can only move in one direction.
• Cost to complete taken from the budget left. The unspent tender allowance is a record of what was priced, not a forecast of what is left.
• Missing accruals, which flatter the month they are missing and punish the month they arrive.
• Retention netted off value. Retention is held money; netting it off understates the value of the work. Retention you do not expect to recover in full belongs in a provision.
• Contra-charges ignored until they are deducted. Provide for a threatened contra-charge in the month it is threatened, at what you expect it to cost, and release the provision if it is withdrawn. Arguing the charge is a separate job from reporting it.
• A forecast loss spread over the months that remain. If the forecast final cost is higher than the forecast final value, the job is forecast to lose money, and prudent practice is to report the whole forecast loss in the month it is foreseen rather than a slice of it each month. How the statutory accounts treat it is a question for the firm’s accountants.

What should you do when the forecast moves?

A forecast that moves is doing its job. What matters is that every movement has a named cause and someone who owns it. Set this month’s forecast margin against last month’s and account for the difference line by line: a variation agreed below the figure carried, a head re-estimated, a provision made or released. Then decide what each movement asks for.

• The forecast margin is fading while the margin to date holds: the cost to complete is catching up with what the site already knows. This is the earliest warning the report gives, and the time to act is now.
• Work in progress keeps growing: apply for it, or find out why it cannot be applied for.
• Under-certification keeps growing: check the notices. A payment notice or pay less notice that is missing or late can leave the sum applied for payable in full, and the guide to the notified sum explains when.
• Unconfirmed variations are piling up: confirm the instructions in writing this week, while the people who gave them still remember giving them.
• The end of the job is in sight: the forecast final value becomes your opening position, and closing a final account sets out the evidence it needs, the deductions that appear at the end of every job and the order to negotiate in.

Keeping it in one place

VariationFlow’s CVR keeps a report per project for each period, pulls the value certified through from the project’s valuations instead of having it retyped, carries cost and accruals by head with provisions on a line of their own, and holds the QS’s forecast final value and cost beside the margin earned. Where the tender was priced as a bill of quantities, each section can be mapped to a cost head so the report shows budget against cost, head by head, and the executive view on the dashboard reads each project’s health from its last two CVRs as improving, stable or eroding.

This guide is general information about commercial practice, not accounting or legal advice. How a firm recognises revenue and losses in its statutory accounts is a question for its accountants, and whether a delay or a variation is recoverable turns on the words of your own subcontract.