1. Introduction and Objectives
Managing cash flow is critical during long-term projects. Contract costing uses a specific terminology framework to track project billings, physical milestones, and safety cash holdbacks.
 
2. Operational Cash Management Metrics
  • Value of Work Certified: The monetary value of the project completed to date that has been officially verified and approved by the client’s independent inspector.
  • Cost of Work Uncertified: Costs incurred on production steps that are completed but have not yet been officially certified by the inspector (e.g., work done between the last inspection and the accounting close date). This is carried on the balance sheet as part of WIP inventory.
  • Progress Billings: Invoices sent to the client requesting partial payment based on milestones reached.
  • Retention Money: A percentage of progress billings (typically 5–10%) that the client legally holds back until the entire project is completed. This serves as financial security to ensure the builder corrects any future structural defects.

    Cash Received from Client = Value of Work Certified − Retention Money Amount

 
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