How to use the percentage of completion calculator
- Enter the contract price and the estimated total cost at the start of the work.
- Add a row for each period with the cost in that period. If your estimate of the total cost changes, enter the new total estimate in that row.
- Read the revenue recognized to date, the percent complete and the gross profit.
- Use the table to see revenue and gross profit for each period, and the CSV for your records.
Formula
percent complete = costs to date / estimated total cost
revenue to date = percent complete x contract price
revenue for a period = revenue to date - revenue to date at the end of the last period
gross profit for a period = revenue for the period - cost in the period
This is the cost-to-cost method. When the estimate changes, the revenue to date is recalculated and the difference falls in the period of the change, which is called a cumulative catch-up.
A $1.2 million contract over three years
The price is $1,200,000 and the first estimate of total cost is $1,000,000. Year 1 costs $300,000, which is 30% complete, so revenue to date is $360,000.00 and the gross profit is $60,000.00. In year 2 the cost is $450,000 and the estimate rises to $1,050,000. Costs to date are $750,000, which is 71.43%, so revenue to date is $857,142.86 and year 2 revenue is $497,142.86 with a gross profit of $47,142.86.
Year 3 costs $300,000 and brings costs to $1,050,000, which is 100%. Revenue to date is $1,200,000.00, so year 3 revenue is $342,857.14 and its gross profit is $42,857.14. The three years of revenue add up to the contract price of $1,200,000.00 and the profit adds up to $150,000.00, the price less the final cost.
Why the estimate matters
The method spreads revenue in step with cost, so an accurate estimate of the total cost is what makes the percentages meaningful. If you learn in year 2 that the job will cost more than planned, percent complete drops for the same cost to date and the extra effort shows up as lower profit in that period. The catch-up in the period of the change is by design.
The page refuses rows where the costs to date are more than the estimate, because percent complete would pass 100%. Raise the estimate in that row to continue.
Loss contracts and your reporting rules
If the estimated cost is higher than the price, accounting rules usually ask for the whole expected loss to be recorded at once. The page shows a warning in that case and does not model that rule. Which method, estimate and standard to use depend on your reporting rules and your accountant. For billing on progress, see the Progress Billing Calculator, and for project cost and schedule control see the Earned Value Management Calculator.
Assumptions and limits
- Progress is measured by cost incurred compared with the current estimate of total cost.
- Revenue is rounded to cents at each period end, and period revenue is the change in revenue to date.
- The contract price and estimates are examples you can replace. Change orders, retainage and billing are not modeled.
- This shows the arithmetic of one method and is not accounting or tax advice.
Frequently asked questions
What is the cost-to-cost method?
It measures how far along a contract is by dividing the cost incurred so far by the estimated total cost, then recognizes that share of the contract price as revenue.
What does the new total estimate column do?
It replaces the estimate from that row onward. Revenue to date is recalculated with the new estimate, and the difference from the previous revenue to date is booked in that period.
Why can a period have negative revenue?
If the estimate rises a lot, percent complete can fall, so revenue to date goes down. The change for that period is then negative, which is how an upward revision of cost is reflected.
Does the page handle billing and cash received?
No. It only recognizes revenue and gross profit. Amounts billed, retainage and cash collected are separate and can differ from revenue in any period.