Ten‑Job Margin Reconciliation
This is what the $2,500 engagement produces. The contractor here is invented — a mechanical firm doing about $8M — but the reconciliation is real work on a real dataset, and every figure below came out of the procedure rather than being written to look good. Two of the ten jobs move materially. Three do not move at all.
What was reconciled
Three records: job cost detail by job and cost code, general ledger detail for job cost and revenue accounts, and payroll summarised by job. At least two must be independently maintained. Where two come out of the same system we treat them as one source and say so — a figure that agrees only with itself is not evidence.
Materiality here is the greater of $500 and 0.5% of each job’s contract revenue, capped at $5,000. Differences below that are aggregated into a per‑job untested residual, not itemised.
Reconciled margin, worst first
| Job | Revenue | Ledger says | Reconciled | Change |
|---|---|---|---|---|
| Service — Q3 T&M pool | $128,000 | 3.8% | −0.5% | −4.3 pts |
| Harbor Point Retail | $310,000 | 3.6% | 6.1% | +2.5 pts |
| Elmwood Apartments Ph2 | $780,000 | 8.1% | 8.1% | — |
| Northgate Distribution | $1,120,000 | 9.3% | 9.3% | — |
| Tri‑County Warehouse | $2,150,000 | 11.2% | 10.4% | −0.8 pts |
| Riverside Medical Office | $940,000 | 12.8% | 12.8% | — |
| Cedar Ridge Elementary | $478,500 | 12.9% | 12.9% | — |
| Fairfield Data Center | $1,875,000 | 14.7% | 14.7% | — |
| St. Vincent Clinic | $240,000 | 15.3% | 15.3% | — |
| Maple Street Offices — service | $86,000 | 19.1% | 19.1% | — |
The finding
The service and time‑and‑materials pool is losing money, and the job cost ledger does not show it. Payroll and the general ledger carry 96.5 hours of burdened labor that the job cost system never received. Add it back and the pool moves from an apparent 3.8% to −0.5%. It is the smallest job in the set by revenue and the worst by margin, and nothing in the ledger would have told you.
Harbor Point moves the other way. A vendor invoice was posted twice in job cost and once in the general ledger, making the job look 2.5 points worse than it was. Both directions matter: one of these costs you money, the other costs you a bid you priced too high.
Where the records disagreed
| Job | Amount | Class | What it is, and what we did |
|---|---|---|---|
| Tri‑County | $17,821 | Error | Payroll and the GL carry 312 hours of burdened labor the job cost system never received. Job cost understated; margin is worse than the ledger shows. |
| Northgate | $22,222 | Error | GL costs posted to job code J‑24O7 — letter O, not zero. Job cost has them under the right job, so margin is unaffected; the GL coding is wrong and was corrected. |
| Harbor Point | $7,715 | Error | An identical job cost line posted twice; the GL carries it once. Job cost overstated. Reversed. |
| Service pool | $5,512 | Error | 96.5 hours of burdened labor in payroll and the GL, absent from job cost. This is the finding above. |
| Unassigned | $14,840 | Needs your input | Subcontract cost in the GL with no job segment. It cannot be assigned from the records, so we asked rather than guessed. Two jobs carry an unexplained residual until you answer. |
| Fairfield | $52,000 | Reconciling item | A year‑end adjusting entry in the GL only, moving cost between types. It nets to zero on the job total and is invisible unless you reconcile by cost type. Not an error. |
| Elmwood | $6,949 | Reconciling item | December totals differ; the job total ties exactly. A subcontract invoice was recorded in job cost one period before the GL. Timing, not an error — and invisible unless you reconcile by period. |
| All jobs | 36% | Basis difference | Job cost carries bare wages; payroll carries burdened cost. The rate was derived from the data, not assumed. Labor will never tie one to one, and reporting that as a variance is the most common false finding in this work. |
| St. Vincent | $410 | Below threshold | Under this job’s $1,200 threshold. Disclosed as an untested residual, not itemised — you contracted for a threshold and we kept to it. |
What we did not report
Three of the ten jobs reconciled to exactly $0.00 and appear in the margin table unchanged. The service job at the bottom is fully subcontracted and has no payroll records at all — that absence is correct, and calling it a missing source would have been a false finding. We do not manufacture problems to justify a fee.
The procedure
You receive this in writing, so your own team can re‑run it. The order matters: steps 4 and 5 exist because two of the nine exceptions above are invisible to a job‑total reconciliation.
| # | Step | What it catches |
|---|---|---|
| 1 | Establish the labor basis before calling anything a variance. Derive the burden rate from the data. | False labor variances |
| 2 | Tie payroll to job cost labor on the burdened basis, per job. | Unimported time |
| 3 | Tie job cost to the general ledger at job‑level control totals. | Missing and duplicated cost |
| 4 | Tie again by cost type. | Entries that net to zero |
| 5 | Tie again by period. | Cutoff differences |
| 6 | Identify orphan job codes and cost carrying no job segment. | Miscoded and unassigned cost |
| 7 | Detect duplicate postings inside job cost. | Overstated cost |
| 8 | Compute reconciled margin, rank it, and disclose the residual below threshold. | The answer, and its limits |
What this is not
Weekgrade is not a CPA firm and holds no accountancy licence. This is not an audit, review, compilation, examination or attestation, and we express no opinion on your financial statements or on the correctness of any figure. We do not test internal controls and do not undertake to detect fraud or all errors. Differences between systems often arise from timing, cost coding, system configuration or different accounting bases; they are not necessarily errors, and we do not call them errors unless the evidence supports it.
Ten jobs cannot prove a conclusion about a whole type of work. Where a pattern repeats we flag it for further testing and say so. That is why the finding above is stated about one pool, not about service work in general.
Reconciliation procedure completed · Signed [Analyst name], Weekgrade analyst · Source definitions and exception dispositions confirmed by [Controller name], Controller
Prepared for internal management use. Not an audit, review, compilation, examination or attestation. “Verified” means reconciled to the named sources under our documented procedure; it is not a guarantee that any figure is correct. No third party may rely on this document.
Illustrative sample built on a synthetic dataset. No client’s records were used. Bracketed names mark where the two signatures appear on a real engagement.