EP 14 - Final Accounts

Final accounts represent a significant milestone in your contractual relationship with the client. They provide you with closure and allow you to access the final unagreed sums.

Let’s take a look at how you can get to a final account quickly and the upside of final accounting, and the benefits it can bring.

I’ve been involved in some very protracted final account negotiations, and neither party benefited from this, and the longer it goes on, the more fractured the relationship becomes, and the amount you can claim diminishes as the client pushes back and digs their heels in hoping you’ll go away.

Here are some tips on how to get to a final account agreement quickly:

• Interim final accounts: On projects where your programme is 6 months +, build into your commercial process an interim final account meeting every quarter. This means you’ll be progressively agreeing variations as the project progresses, and there will be less items to agree when you’ve completed the project.
• Forecast Final Accounts: A simple but subtle way of managing the expectation of the client is to include a “Forecast Final Account” line item in your monthly applications and adding in budget to items which you haven’t got the final cost for. By doing this, the client will understand the cumulative liability associated with your works, so there are no surprises at the end.
• Calling for the final account meeting: Be the instigator of arranging the final account meeting. If you sit back and wait for the client to organise it, you will never get to a final account agreement. Instead, when you submit your final account application, send the client a request for a meeting 4 weeks from issuing the application. Assuming you’ve provided all the relevant information and have agreed variations progressively, a month should be ample time for the client to review your account and raise queries.

Now we’ve looked at how to get to a swift final account agreement, let's take a look at the benefits and why we should do it:

• Payment: Cash is king!! A swift final account agreement means you get paid quicker, and that means more money in your bank account!
• Retention: More cash! Retention should either be released on the completion of your works or on completion of the main works - clients can be slow in releasing the first part of the retention, so to speed this up, wrap up the retention into the agreement.
• Negotiations: There will be no doubt negotiations at the final account stage and some disagreement over the costs and validity of the changes and claims. When you’re edging near to the end of the agreement, and the client wants to make a deal, use this to your advantage and mitigate your commercial risk by offsetting the commercial discount with a full retention release. This way, you will have the last 2.5 or 1.5 % of your project in your bank account, and there’s no need for you to set reminders and chase the release 12/24 months later down the line.
• Relationships and future work: Getting around the table with the client to agree your final account gives you the opportunity to start discussing future works together – if you’ve priced another project for them, you could propose a commercial discount to secure the other project.

The Takeaway:

Final accounting your projects is a process that should be built into every subcontracting business – big or small. A final account brings you closure and additional money but also gives you the opportunity to negotiate commercial arrangements and continue to cultivate the relationship with the client.