Cost value reconciliation (CVR) is the regular check, usually monthly, that compares the value a contractor has earned on a job with the cost it has incurred to earn it, so the margin actually being made can be measured against the margin that was tendered.
It is the core commercial report in UK contracting. Quantity surveyors and commercial managers prepare it, directors read it, and the company's monthly accounts are often built on it. The arithmetic is simple — value minus cost — but almost all of the skill lies in getting both figures honest, and in running it early enough that the answer can still change the outcome.
What a CVR compares
A CVR sets a handful of figures for the same job side by side and reads the gaps between them:
- Value — what the work done to date is genuinely worth. It starts from the latest valuation or application for payment, then gets adjusted (more on that below), because what you have applied for and what you have earned are rarely the same number.
- Cost — what it has cost to deliver that work: invoices booked, labour, plant, materials, plus accruals for work done but not yet invoiced.
- Budget — the cost you won the job on, traced back to the estimate. Everything is measured against this.
- Committed cost — every purchase order and subcontract order raised, paid or not. It is the leading indicator: an order binds you the moment it goes out. See what is committed cost.
- Forecast final — where value and cost are heading at completion, which is the figure that tells you whether you still have a problem you can fix.
Value minus cost gives margin to date. Forecast final value minus forecast final cost gives forecast margin. A CVR that only reports the first is a history lesson; the second is what makes it a management tool.
How the CVR calculation works
Adjusting value
The gross valuation is the starting point, not the answer. A careful CVR adjusts it for:
- Over-measure — work applied for ahead of where it actually is (front-loading). Deducted.
- Under-measure — work done but not yet applied for. Added, prudently.
- Variations — agreed variations not yet in the valuation are added; unagreed ones are added only at a value you can defend, if at all.
- Provisions — known liabilities that will reduce value, such as a likely contra-charge or a disputed item.
The result is sometimes called the internal or adjusted value: your own honest view of what the work is worth, separate from what the client has certified.
Adjusting cost
Ledger cost is usually behind reality, because invoices lag the work. So cost to date is:
- booked cost from the accounts,
- plus accruals for subcontract work, materials and hire received but not yet invoiced,
- less anything paid for but not yet used on the job (materials still in the yard, prepayments),
- plus provisions for costs you know are coming for the work already done (a defects allowance, for example).
Over-recovery and under-recovery
When value earned on an element runs ahead of the cost spent on it, that element is over-recovering; when cost runs ahead of value, it is under-recovering. Preliminaries are the classic case. Prelims priced at £3,000 a week over a 20-week programme (£60,000) are usually valued in line with progress. If the job is 12 weeks in but only half complete, roughly £30,000 of prelims value has been earned against £36,000 spent — a £6,000 under-recovery that will keep growing every week the job overruns. See prelims in construction, explained.
Over-recovery is not automatically good news either. A valuation that is front-loaded makes margin to date look healthy while storing up a loss for the end of the job.
A worked example
The figures below are illustrative, for a £500,000 fit-out contract tendered at a 12% margin (budget cost £440,000), at the end of month four.
| Line | Value | Cost |
|---|---|---|
| Gross valuation applied | £265,000 | |
| Less over-measure on ceilings | −£8,000 | |
| Add agreed variation not yet applied | +£6,000 | |
| Booked cost from the ledger | £214,000 | |
| Add accruals (sub work not yet invoiced) | +£18,500 | |
| Less materials on site, not yet fixed | −£3,500 | |
| Totals to date | £263,000 | £229,000 |
Margin to date is £263,000 − £229,000 = £34,000, or 12.9% of value. On that line alone the job looks slightly ahead of its 12% tender margin.
Now the forward view. The purchase and subcontract orders raised so far total £398,000 against the £385,000 of budget lines they cover — £13,000 over-committed. The forecast final value is £514,000 (contract plus £14,000 of agreed variations); the forecast final cost is £459,000 (budget, plus the £13,000 over-commitment, plus £6,000 of variation costs). Forecast margin is £55,000, or 10.7% — 1.3 points below tender.
That is the whole case for a good CVR in one example: margin to date said "fine", while committed cost had already locked in an erosion that would only have surfaced in actuals months later.
What a CVR report contains
A typical CVR report, per job and rolled up across the company, shows:
- Contract sum, agreed variations and the revised contract value.
- Value to date, with the adjustments from gross valuation listed.
- Cost to date, with accruals and provisions listed.
- Margin to date, in pounds and as a percentage, against the tender margin.
- Committed cost against budget, ideally line by line or package by package.
- Forecast final value, forecast final cost and forecast margin.
- Movement since last period — what changed, and why.
- Notes on risks and opportunities: unagreed variations, claims, contra-charges, programme.
Company-wide, the same figures roll up into the board's view of work in progress and, at the end of the job, into the final account.
Advantages and disadvantages of CVR
Advantages
- It measures margin on each job, not just across the business, so a loss-maker can't hide behind a good one.
- It forces value and cost to be stated on the same basis, at the same date.
- Done properly, it surfaces under-recovery, over-commitment and unpriced variations while there is time to act.
- It gives the monthly accounts a defensible basis for recognising profit (or loss) on long contracts.
Disadvantages
- It is labour-intensive when value, cost and orders live in separate spreadsheets and systems, and has to be rebuilt every month.
- It is only as honest as its adjustments. Optimistic valuations and missing accruals produce a margin that isn't there.
- It is backward-looking if it is based on ledger actuals alone; committed cost is what makes it look forward.
- Run two weeks after month-end, it often reports decisions that can no longer be changed.
Most of the disadvantages are about how CVR is produced, not the method itself.
How often should you run a CVR?
Monthly is the norm, because it lines up with valuations and the accounts. But the figures that drive it — orders raised, invoices booked, variations instructed — change daily. A monthly snapshot is fine for the board; for the commercial team, a live view of budget against committed and actual is what catches problems early. Many contractors keep the monthly CVR as the formal record and watch committed cost weekly in between.
Who prepares it?
On most contractors' jobs the project quantity surveyor or commercial manager prepares the CVR, the project manager contributes the programme and cost-to-complete view, and the commercial director reviews it before it feeds the management accounts. Subcontractors do the same exercise on their own packages — and arguably need it more, because their margins are thinner and their cash depends on applications being certified in full.
CVR in Vyntworks
In Vyntworks, live CVR is a by-product of the work rather than a separate modelling exercise. The Finance → CVR tab rolls up every project with columns for Budget, Committed, Actual and Forecast Final, plus Recognised revenue to date, the resulting Variance (red the moment it turns negative) and a live GP %. Open a row for that project's full CVR grid.
The inputs are the job's own records:
- Budget is the estimate the job was won on, carried across when the quote converts — see from won tender to live project.
- Committed is the sum of the real purchase and subcontract orders raised against the project, through your value-band authorisation.
- Actual is matched invoices — or, where Xero is connected, the cost booked against the project in the general ledger, with accruals and their reversals netted off.
- Value comes from the internal valuation you set line by line, and switches to the client-certified position once an application for payment is agreed.
Approved variations land on the valuation as their own rows, and an overspend report lists every line where order spend has passed budget. Live CVR, WIP and overspend reporting are part of the Vyntworks Intelligence add-on (see pricing).
If your reconciliations land too late to change the outcome, book a walkthrough and we will build the CVR on one of your own live projects, so you can watch committed, actual and forecast move as the job runs.