Percent complete and the profit the company books: what your number does in the accounts
The tire-shop job's report still says 60% complete. The project manager knows the remaining site works will cost more than the budget assumed. The percentage was copied from last month because changing it seemed less urgent than finishing the work.
Use the progress method the accountant has selected and support its inputs with the current forecast. In a cost-based method, eligible costs to date are compared with total expected eligible costs; a physical measure uses different evidence. The IFRS Foundation's public explanation distinguishes input and output methods for obligations satisfied over time. Percent complete is therefore a calculated measure on a stated basis, not a rounded opinion or the percentage billed.
Give accounts a measure it can rely on
- Ask which method applies. Confirm the accounting framework, contract and performance being measured with the controller. Obtain the required input definitions. Do not assume the same simple ratio is suitable for every job or that physical progress and revenue progress must be identical.
- Update the total expected cost. Review the remaining scope with the superintendent and reconcile commitments and known exposures. Keep the forecast date visible. An unchanged budget is not evidence that the work still to complete can be performed for its remaining allowance.
- Check the eligible cost input. Reconcile the cutoff with accounts and identify exceptions such as major delivered items or repeated work for the controller's review. Preserve the job-cost record separately from any adjustment made for the revenue calculation.
- Show the calculation and its basis. Provide the numerator, denominator and resulting measure rather than sending a rounded percentage alone. Under a physical method, retain the measured quantities and completion criteria. Explain missing evidence instead of giving a more confident-looking number.
- Compare the result with the previous issue. Separate the effect of additional work from a changed estimate of what remains. Ask accounts to explain the revenue and profit implications under its method; the project team should not adjust the forecast to reach a preferred reported result.
- Keep billing and cash visible beside it. Identify why a claim or receipt differs from the progress measure without replacing that measure. Review the inputs again when new information materially changes the expected remaining work.
Common mistakes
- Keeping the denominator at budget while acknowledging additional remaining cost elsewhere.
- Rounding a measure to the percentage the team hoped to reach.
- Treating a billing percentage as proof of the accounting progress measure.
Action list
Before sending the percentage
- Confirm the chosen method and input definitions.
- Date the remaining-cost forecast.
- Reconcile cost or quantity evidence.
- Identify exceptions for accounts.
- Explain the movement without changing inputs to suit it.
Check your understanding
Costs to date are unchanged, but expected remaining cost increases. Can a cost-based progress percentage fall?
