Physical Completion Is Not Commercial Completion
There's a date every project-based business tracks carefully: practical completion. And there's a second date, far more important to profitability, that most businesses don't track at all — the date the job is commercially closed.
The gap between those two dates is where a surprising amount of margin goes.
What stays open after handover
When a job reaches physical completion, attention moves. The crew mobilises to the next site, the project manager picks up the next job, and the completed project drops out of the weekly conversation.
What remains open behind it is usually some combination of:
Purchase orders never cancelled, still showing as commitments against the job
Variations executed on site and never formally claimed
A final progress claim drafted but not submitted
Subcontractor accounts not reconciled to work actually performed
Accruals raised months earlier and never adjusted to actual
Retention with no release date recorded
Defects rectification costs being incurred against a job that management believes is finished
None of these are dramatic individually. Collectively, on a single job, they routinely account for two to four points of margin.
Why margin decays after handover
The critical point is that these items don't hold their value while they wait. They erode.
A variation claimed three weeks after the work was done is a documentation exercise. The same variation claimed five months later is an argument. The site records are harder to find, the client's project manager may have moved on, and your own supervisor's recollection has faded. The client's position shifts from "yes, we asked for that" to "that should have been included".
Subcontractor reconciliation follows the same curve. While the site is live, a disputed quantity can be walked and measured. Once demobilised, it becomes a negotiation between two sets of paperwork, and the party with more time to spend usually wins.
Accruals are a different problem. An accrual raised at $40,000 that settles at $22,000 releases $18,000 of margin into whatever period the adjustment is finally made. That period is typically several months after the job — so a good month appears in your P&L that has nothing to do with current trading, and your reported performance becomes harder to read.
A closeout process, not a debrief
Most businesses that recognise this problem respond with a project debrief — a meeting where the team discusses what went well and what didn't. Useful, but not the same thing.
What's needed is a financial close, with the same structure a month-end close has:
A trigger. Commercial closeout begins at practical completion, not when someone remembers.
A checklist. Open POs cancelled or converted. Final claim submitted. All variations reconciled — claimed, approved, paid. Subcontractor accounts agreed and closed. Accruals adjusted to actual. Retention register updated with release dates and owner.
A deadline. Thirty days from practical completion for everything except retention.
A sign-off. One named person confirms the job is commercially closed. Until they do, it stays on a live list that gets reviewed.
The step everybody skips
The final item on the checklist is a comparison of actual margin to tender margin, with the variance explained in writing.
Not a number — an explanation. Which line moved, by how much, and why. Labour hours over on setout. Materials under because of a procurement win. Two variations claimed at cost because they were never priced properly.
This is the only mechanism by which a business systematically improves its estimating. Without it, every estimator is working from instinct and aggregate history, and the same mistakes get priced into job after job.
It takes about forty minutes per job. It's the highest-return forty minutes in the business.
The list that matters
The simplest version of all this is a single visible list: jobs physically complete, commercially open, with days elapsed since practical completion.
If that list has jobs on it that finished six months ago, you already know where some of your margin went.