$300,000 was allowed in the budget. $340,000 is about to be committed.
That $40k difference needs a closer look before the commitment is approved. Not because it automatically means the job is losing money, but because you need to understand why the cost has moved beyond the allowance.
Was the original budget too low? Has the scope changed? Is there an approved variation that hasn’t been reflected yet? Has something been coded to the wrong cost code?
Each points to a different issue - and a different action. The important thing is seeing the difference before the cost is committed, not after it hits the job.
There are plenty of reasons for a gap between the allowance and the cost. The original estimate may have been light, quantities may have changed, the subcontract could include additional scope, or some of the cost may already be accounted for elsewhere in the budget.
Then there’s coding. Say crane hire was included in the structural steel allowance, but the invoices are coded to preliminaries instead. The overall job cost might still be on track, but your cost codes are telling a different story: structural steel looks better than it really is, while prelims look worse.
At that point, you’re no longer comparing like with like - and it becomes much harder to see where the job is actually tracking against budget.
The reason behind the difference matters because each one calls for a different response. If the estimate was light, that’s something to learn from and tighten up at tender stage next time. If the subcontract includes additional scope, that’s a commercial conversation. And if it’s simply a coding mismatch, it may cost nothing to fix - but left alone, it will distort every report that follows.
Treat them all as the same budget problem and you risk spending time fixing the wrong thing.
Pick one package where the cost and allowance don’t line up, then ask:
1. What did the original estimate actually allow for?
2. What does the subcontract actually include?"
3. Are the same scopes being compared, or has something changed?
4. Where is the cost being coded - and is that where it was originally allowed?
You don’t need to be an expert in the trade to spot the issue. You just need enough visibility to work out whether you’re looking at a budget problem, a scope problem or a coding problem.
And unlike plenty of margin problems, this is one you can start investigating straight away.
Software can put the original allowance and the proposed commitment side by side, flagging the difference before anything is approved. That means the right people can see potential budget issues early, while there's still time to investigate and make an informed decision.
The real value comes from combining that visibility with an understanding of what was originally allowed for. Was the estimate light? Has the scope changed? Are costs being coded consistently with the budget?
The software's job is to surface the information. The team's job is to use that information to ask the right questions and understand what's driving the difference before the cost is committed.
This is one of six warning signs explored in a market report produced by Lentune in conjunction with Carmel Turner, lead consultant at Margin Insight. The rest are in the full report, along with a checklist for getting the PO conversation right before the invoice turns up.
Read the report: Six warning signs your construction margin may be under pressure
Margin Insight is a construction diagnostics and analytics practice led by Carmel Turner. Carmel has more than 30 years’ experience across construction financial accounting, contract administration, commercial management, project delivery and technology. Margin Insight focuses on turning construction data and project information into useful commercial insight. It does this by identifying where something deserves a closer look and applying practical commercial reasoning to what should be checked next.
Lentune connects your worksites with your finance team, bringing project costs, accounts payable, purchase orders, progress claims and variations into one place. Your team can see what a job is actually costing while there is still time to do something about it. Less manual entry, fewer spreadsheets running alongside your accounting system, and better visibility across the job.
Built in Christchurch and used by construction businesses across Australia and New Zealand. Want to see how it works on your own projects? Request a demo.