Worked example / fictional demonstration
How a contractor spending review explains a $5,000 budget increase
Fictional demonstration. All businesses, records, figures and scenarios on this page are invented for illustration. This is a sample of the approach and deliverable, not a client case study, testimonial or achieved result.
A fictional creative agency has a $60,000 fixed-fee project and sees $15,000 of payment requests awaiting review. Leadership wants to understand whether contractor spending has exceeded the original plan and what the project is likely to contribute.
The records to reconcile
The sample review uses an original project budget, three contractor agreements, two approved change orders, an invoice register and bank-confirmed payment records. Each payment request is matched to the contractor, invoice number, amount, currency and underlying work.
A sample contractor commitment register
| Contractor | Original budget | Approved changes | Forecast total | Already paid | Valid unpaid invoices | Unbilled remaining work |
|---|---|---|---|---|---|---|
| Design team | $12,000 | $3,000 | $15,000 | $9,000 | $4,000 | $2,000 |
| Production team | $10,000 | $2,000 | $12,000 | $6,000 | $5,000 | $1,000 |
| Editing team | $8,000 | $0 | $8,000 | $3,000 | $3,000 | $2,000 |
| Total | $30,000 | $5,000 | $35,000 | $18,000 | $12,000 | $5,000 |
Reconciliation: $18,000 paid + $12,000 valid unpaid invoices + $5,000 unbilled remaining work = $35,000 forecast contractor cost. The $5,000 of unbilled work is an estimate within the approved scope. It is counted once in the forecast.
The finding: two separate questions
Budget variance: The forecast is $5,000 above the original $30,000 contractor budget. Approved change orders explain that increase. Check the authorization and whether the agency agreed to absorb these costs or can bill additional revenue.
Payment exception: The $15,000 payment queue includes a second $3,000 request for design invoice A-104. Both requests refer to the same invoice and work. The source invoice and payment history support only one unpaid $3,000 obligation, already included within the design team’s $4,000 unpaid balance. Removing the extra queue entry leaves $12,000 of valid unpaid invoices. This demonstration identifies a duplicate request; it does not establish an actual duplicate payment or recovered savings.
The project profitability bridge
| Item | Original plan | Reconciled forecast |
|---|---|---|
| Project revenue | $60,000 | $60,000 |
| Contractor costs | $30,000 | $35,000 |
| Other direct costs | $10,000 | $10,000 |
| Project contribution | $20,000 | $15,000 |
| Contribution margin | 33.3% | 25.0% |
Project contribution = revenue − contractor costs − other direct costs. Margin = contribution ÷ revenue. The approved cost increase reduces contribution by $5,000 and margin by 8.3 percentage points. The forecast assumes no additional customer revenue. Corporate overhead, financing costs and taxes are excluded, so contribution is not net profit.
A sample decision brief
Proposed action: Validate and remove the repeated payment request before release. Confirm that the approved scope can be completed within the remaining $5,000 estimate. Ask the project lead to assess whether the extra scope supports a customer change order; include additional revenue only after agreement and a supportable forecast.
| When | Owner | Action | Evidence of completion |
|---|---|---|---|
| Before payment | Client payment lead | Resolve the repeated A-104 request and approve valid invoices | Invoice and payment references retained |
| Within 7 days | Project lead | Confirm remaining deliverables and estimated contractor cost | Updated scope and completion estimate |
| Within 14 days | Client leadership | Decide whether to seek an agreed customer change order | Documented commercial decision |
| Within 30 days | Finance and project leads | Compare actual cost and approved changes with this forecast | Updated register and variance explanation |
What this example demonstrates
A useful review connects the budget, approved commitments, invoices and cash already paid. A payment-queue total alone cannot establish total project cost. An approved change can still reduce profitability, and a duplicate request needs evidence before anyone calls it an overpayment.
In a live engagement, the client validates source records and retains authority over payments and commercial decisions. See the project profitability assessment for starting fees, scope and deliverables, or explore the 13-week cash forecast demonstration.
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