Why Do Profitable Jobs Lose Money, and How Do You Catch Overruns Early?#

Most jobs that lose money were bid at a fair margin and lost it slowly: the crew installs less per day than the estimate assumed, extra work gets done without a priced change order, and rework eats hours nobody budgeted. The usual reports hide it, because labour cost shows up after payroll, bills arrive at month end, and a cost-to-cost WIP report calls a job further along the more you overspend, unless someone raises the estimate to complete. You catch it by comparing, every week and by cost code, the percent complete your foreman sees on site with the cost you've burned, then re-forecasting what it will cost to finish at that pace.

Which reports catch an overrun, and when?#

Check	What it compares	What it tells you	What it can miss
Budget vs actual	Cost to date vs the budget	How much budget is left	Whether the work is done. 60% spent is fine at 60% complete and a problem at 40%.
Cost-to-cost WIP	Cost to date ÷ estimated total cost = percent complete	Revenue earned, over and under billings, for the bank and the bonding company	Overspending makes the job look further along unless someone updates the estimate to complete
Earned vs burned	Field-measured percent complete × the line's value, against actual cost	Whether the hours and material bought the progress they should have	Only as good as the percent complete the foreman reports
Cost to complete	Cost to date plus a forecast of what's left	The margin you'll actually finish with	Only as good as the pace you assume

You need all four, but only earned vs burned checks the cost against something the cost didn't produce: the work actually in place.

Why does a job lose money when it was bid right?#

Profit fade, as CLA's construction group defines it, is "a gradual reduction in the gross profit on a project." It is rarely one bad day. On a trade contractor's job it usually comes from a short list:

• Productivity. The estimate assumed a certain amount of pipe insulated per crew-day. Congested ceilings, stacked trades or waiting for access cut that, and every hour costs the same.
• Unpriced extra work. The GC's super asks for a reroute "while you're there." It gets done, it never becomes a change order or a T&M ticket, and the cost sits in your job with no revenue against it.
• Rework and damage. Another trade cuts through finished jacketing. If nobody records it the same day, it's your cost.
• Crew mix and overtime. More journeymen and fewer apprentices than the estimate, or a schedule push that turns into weeks of time and a half.
• Material. Waste, theft and re-orders that land on the job but weren't in the takeoff.

None of these shows up as a single big number. Each shows up as a cost code burning faster than it's progressing.

Why doesn't the WIP report catch it?#

Most WIP schedules measure percent complete by cost: cost to date divided by total estimated cost. A Construction Executive guide to WIP schedules describes it as calculating "the percent complete based on cost incurred." That's the standard method, and it's fine as long as the estimated cost to complete is honest.

Here's the trap. If you overspend and nobody raises the estimated total cost, cost-to-cost says the job is further along than it is, and books the profit that goes with it. The overrun turns into "progress." The margin doesn't fall until someone finally updates the estimate, usually near the end, and then it falls all at once. That's the fade.

The fix isn't to stop using the WIP. Your bank and surety want it. The fix is to check it against progress measured in the field.

What does earned vs burned show that the WIP doesn't?#

Here's one cost code on a hospital job. The numbers are made up for illustration.

Cost code 210, chilled water pipe insulation, Levels 1–4

• Value on the schedule of values (what you bill for it): $360,000
• Cost budget: $300,000, so the planned margin is $60,000
• After ten weeks: $180,000 spent. The foreman says the line is 45% installed.

Measure	Calculation	Result
Budget used	$180,000 ÷ $300,000	60%
Work complete (field)	Foreman's percent, confirmed by the PM	45%
Earned	45% × $360,000	$162,000
Burned	Actual cost to date	$180,000
Earned minus burned	$162,000 − $180,000	−$18,000
Cost at completion at this pace	$180,000 ÷ 45%	$400,000
Margin at completion	$360,000 − $400,000	−$40,000

On a cost-to-cost basis, with the original $300,000 still the estimate, the same line reads 60% complete, $216,000 of revenue earned against $180,000 of cost, and a healthy $36,000 profit to date. Same job, same week. One view says on track; the other says this line has gone from $60,000 profit to a $40,000 loss.

Caught at 45%, you still have more than half the line to fix: find out why the crew is slow, price the extras, re-sequence the work, and tell the GC early. Caught at closeout, the only thing left is the lesson.

What should you check every week?#

1. Are last week's hours approved and on cost codes? If labour isn't coded, nothing below works.
2. Is percent complete from the field? The foreman walks it; the PM confirms it. A percentage the office guesses at only repeats the budget.
3. Which cost codes are burning faster than they're earning? Sort by the gap, not by the size of the line.
4. What does finishing cost at this pace? Re-forecast those lines. A forecast that never changes isn't a forecast.
5. Is there extra work in the cost with no revenue? Turn it into change orders or T&M tickets this week, while the super still remembers asking.

Once a month, roll it up to the WIP so the cost-to-cost numbers carry your updated estimates, not the original budget.

Where is Appello not the right fit?#

Appello is built for ICI trade contractors, often union, with about 20 to 400 field staff. It isn't built for:

• Residential builders and remodellers.
• General contractors who need document control for the whole building.
• One-person shops with no crew to cost.

Where does Appello fit?#

Appello is for trade contractors who want to see the cost code burning in week three, not read about it at closeout.

• Cost lands as it happens. Labour lands on the job and cost code the moment a timesheet row is approved, with no month-end batch. Supplier and subcontractor bills land when they're entered in Appello or synced in from QuickBooks Online. Equipment time, worker expenses and material issued to the job count too.
• Percent complete from the field. Anyone with mobile access to the job can submit percent complete per schedule of values line from the phone. The office, usually the PM, confirms it on a progress report, and that confirmed number drives earned value and the progress invoice.
• Earned vs burned. For every cost code, Appello shows earned (approved percent complete × the line's value) against actual cost, with cost performance (CPI), estimate at completion and estimate to complete, and flags each line on budget, at risk or over budget. Pick any as-of date to see where a line stood that week.
• Cost to complete. A forecast is generated for each progress report and approved, showing forecast cost, forecast value and margin, period by period, so you can see the margin trend before the last period.
• WIP when the bank asks. The WIP report gives percent complete by cost, earned revenue against billed, and over and under billings as of any date, in CSV or PDF.
• Ask in plain English. Through Appello's MCP connector, you can ask ChatGPT, Claude, Microsoft Copilot or another MCP-enabled AI assistant, "Which cost codes on the hospital job are over budget or at risk?" and get the answer from the same numbers as the dashboard, grouped by cost code, area, system or phase. See what MCP is.

"Appello completely changed how we run our jobs. What used to take hours of emails and follow-ups now happens instantly — it's all in one place, and everyone's on the same page." — Katharine Barnes, Vice President, R.A. Barnes Electrical Contractors

Pick a job that worried you last quarter and bring it to a demo. We'll show you which cost codes Appello would have flagged, and when. See Job Financials.

FAQ#

What is profit fade?
A gradual drop in a job's expected gross profit between the bid and closeout. It usually comes from productivity, unpriced extra work and rework, and it's usually found late because reports measure cost, not progress.

What does "earned vs burned" mean?
Earned is what the work in place is worth: percent complete times the line's value. Burned is what it actually cost. When burned catches up to earned on a line, the margin on that line is gone.

How often should we update cost to complete?
On the lines that are moving, weekly. On the whole job, at least monthly before the WIP goes out, so the WIP reflects what you now expect to spend.

Who should report percent complete, the foreman or the PM?
Both. The foreman submits it from site, and the PM confirms it. A number from the field that someone reviews is harder to fool yourself with than either one alone.

Is overbilling good or bad?
Billing slightly ahead of the work keeps cash on your side, and accountants treat underbillings, not overbillings, as the warning sign. But overbilling on a line that's losing money only hides the problem until the billing runs out.

Sources#

All accessed October 14, 2026.

• Robert Mercado and Megan Moriarty (Marcum LLP), Breaking Down the Work-in-Process Schedule, Construction Executive, September 3, 2020
• Bob Sniegowski (CLA), Profit Fade Analysis Helps Construction Companies Keep Projects on Track, March 18, 2016
• Appello documentation, Cost Codes & Schedule of Values, Progress Reports and Job Cost Report

Related reading#

• How Job Costing Works for ICI Subcontractors
• Job Costing Fundamentals for ICI Subcontractors
• What Is a Schedule of Values, and How Do You Build One for a Large Job?
• What Is a Cost-to-Complete Report, and How Do You Read One If You're Not an Accountant?
• T&M Billing: When to Use It and How to Document It
• Appello Job Financials