Construction companies are not paid when they finish. They are paid as the work is measured, certificate by certificate, with advances deducted, retention held back and variation orders added along the way. It is a billing model that spreadsheets handle badly, and the result is cash stuck in the project and margins nobody sees until the end.
The building blocks
- Bill of quantities. The priced list of work items in the contract. Everything else is measured against it.
- Progress certificates. Periodic claims for the work actually done, measured against the bill of quantities.
- Advance payments. Paid up front by the client and recovered by deducting a share from each certificate.
- Retention. A percentage held back from each certificate until handover or the end of the defects period. Main contractors hold it from subcontractors too, so it runs in both directions.
- Variation orders. Changes to the scope, priced and approved, that add to or reduce the contract value.
Where projects leak money
Certificates are submitted late because measurement sits in one file and pricing in another. Retention is forgotten at handover and never collected. Variation orders are carried out before they are approved, and later disputed. Costs are booked to the company instead of the project, so a loss-making project looks fine until it is too late.
If you cannot see a project's margin this month, you will only see it when it is gone.
Good practice
- Measure against the bill of quantities and issue certificates on a fixed cycle.
- Track retention receivable and retention payable per project, with release dates.
- Do not start variation work without an approved, priced order.
- Book every cost to a project, so cost and margin are always current.
How Smartacy handles it
Smartacy's contracting and construction pack runs projects with a bill of quantities, progress certificates from measured work, advances and retention in both directions, variation orders, and cost and margin on every project. Certificates become ZATCA-compliant invoices on the same books, and AI reminds you of retention due for release and flags projects whose costs are running ahead of what has been certified.
