Table of contents6 sections
The project was quoted at 20,000 PLN, and the planned margin was supposed to be 35%. Once the work is finished, however, it turns out that extra hours, corrections and subcontractor costs have cut it to almost zero.
This is a common problem for service companies. The initial quote is built on assumptions, while the actual cost builds up every day during delivery.
Why does the quote start to drift?
It is most often driven by:
- an overly optimistic estimate of the number of hours
- extra corrections not included in the scope
- changes in the client’s expectations
- greater involvement of more expensive specialists
- subcontractor and tool costs
- delays on the client’s side
- no budget updates during the work
Each of these may seem small. Together, however, they can swallow a significant part of the planned margin.
The selling price is not the same as the cost of delivery
The contract value shows how much the client will pay. It does not show how much the company will actually spend on delivering the project.
The actual cost should include, among other things:
- the working time of everyone involved
- the individual hourly cost of each specialist
- subcontractor invoices
- licences and tools
- purchase of materials
- additional meetings and corrections
- work done outside the original scope
If the company does not bring this data together, the project result may look good right up to the final settlement.
How to create better quotes?
Use historical data
A quote should be based on the actual results of similar projects, not on intuition alone.
It is worth checking:
- how many hours similar tasks actually took
- which stages most often went over budget
- how many corrections clients requested
- what costs appeared outside the plan
Add a buffer
A project should include a margin for risks, corrections and unforeseen work. Without a buffer, even a small change immediately lowers the margin.
Separate the core scope from additional work
The contract and the quote should clearly define what the price includes and which tasks will be billed separately.
Monitor the project during delivery
Do not wait until the end of the project. It is worth regularly comparing:
- planned budget
- costs incurred
- hours used
- cost to complete
- current and forecast margin
How does Administy help control the actual cost?
Administy links revenue, costs and working time to a specific project.
The system lets you:
- compare the planned budget with actual results
- convert team hours into actual cost
- assign invoices and external costs to a project
- control the use of the hours budget
- check the cost needed to complete the work
- monitor the current and forecast margin
- detect projects whose profitability is starting to fall
This way the company sees the problem earlier, not only after the last invoice has been issued. It can narrow the scope, change the schedule, bill the additional work or talk to the client about a new quote.
Summary
A quote is a forecast, while the actual cost results from the work actually done and the expenses actually incurred.
The biggest discrepancies arise when the company does not measure time, does not record additional work and analyses profitability only after the project is finished.
Administy lets you compare plan with actuals on an ongoing basis. This makes it possible to spot a falling margin earlier and react before the project becomes unprofitable.
