1. Define the cost of the work
List labor, materials, equipment, subcontractors and allocated overhead once. Decide whether owner time is a pricing cost, a cash payment or both. A sound quote can value owner time even when it does not leave the bank as a separate wage payment.
Use quantities and unit rates for the same job scope. A material quote that already includes cutting, freight or handling should not have the same charge added again elsewhere. Separate the cost estimate from a contingency allowance.
2. Put the margin on the correct denominator
Suppose entered costs total $3,500 and you choose a 10% contingency. The modeled cost budget is $3,850. A 20% target margin requires price = $3,850 ÷ (1 − 0.20) = $4,812.50. Modeled profit at that budget is $962.50. These are fictional figures, not a recommended market price.
Adding 20% to cost would produce $4,620 and $770 profit. That profit is 16.67% of the selling price, because a 20% markup is measured against cost. Before using a margin result, check exactly which costs are in its denominator.
3. Keep a cost-overrun scenario separate
Once a quote is fixed, an increase in actual cost reduces profit. Change the overrun input while leaving the quote unchanged. This lets you examine how much uncertainty the quoted contribution can absorb.
A contingency in the quote is an allowance, not proof that the money will be spent. Conversely, a lost or delayed customer payment can create a cash problem even when the job remains profitable on paper.
4. Put receipts and payments on dates
A 25% deposit on the example quote is $1,203.13 when rounded to cents. If $2,000 of cash expenses fall before any later receipt, that first stage alone leaves a $796.87 shortfall with no opening cash. Later dates and expenses may produce a larger gap.
Use the project funding tool for the complete schedule. Increasing a deposit usually reduces the remaining invoice balance; it does not create extra contract revenue. A deposit that covers the first day may still be insufficient later. Opening project cash can fund a shortfall but is not earned job profit.
5. Save a base case and review the differences
Run expected, lower-receipt and higher-cost cases using the same scope. Keep the contract total, expense dates, milestone definitions and opening cash with the result. Check whether same-day receipts are assumed available before same-day costs.
Use a quote to decide what the work must earn and a cash schedule to decide when funds are needed. Both are useful; neither predicts whether the customer will accept the price or pay on time.
Use the calculators
More accounting & finance calculators · Methods, sources and testing