When it comes to contract costing, it`s important to have a system in place that not only tracks expenses but also ensures that the work being done is in line with the contracted agreement. This is where the work certified formula comes in. In this article, we`ll explore how this formula works and how it can benefit your contract costing process.
First, let`s define what work certified means. Work certified is a term used in contract costing to describe the process of verifying that work has been completed as per the agreed-upon contract. This often involves a certification process where a third party, such as an architect or project manager, verifies that the work has been completed to the required standard.
So, how does the work certified formula fit into this process? The formula is used to calculate the value of the work that has been certified. This is done by taking the work completed to date and multiplying it by the percentage of completion as certified by the third party.
For example, let`s say that a contractor has completed 50% of a project as certified by the architect. The total cost of the project is $100,000. Using the work certified formula, the value of the work completed to date would be calculated as follows:
Value of work certified = Total cost of project x Percentage of completion
Value of work certified = $100,000 x 50%
Value of work certified = $50,000
So, in this example, the contractor would be able to invoice the client for $50,000 for the work completed to date.
One of the benefits of using the work certified formula is that it provides a clear and transparent way of tracking progress on a project. By having a third party certify the completion of the work, there is less room for dispute between the contractor and the client. This can help to avoid delays and disagreements, which can ultimately save time and money.
Another benefit of the work certified formula is that it helps to keep everyone involved in the project accountable. By tracking the value of the work completed to date, contractors can ensure that they are staying on track and meeting their obligations under the contract. Clients can also use the formula to ensure that they are only paying for work that has been completed to the required standard.
In conclusion, the work certified formula is an essential tool in contract costing. By using this formula, contractors and clients can ensure that they are on the same page when it comes to tracking progress and invoicing for work completed to date. By providing a transparent and accountable process, the work certified formula can help to avoid disputes and ensure that projects are completed on time and within budget.