Net contract value (before tax):
Retention:
RetentionRemaining = RetentionWithheld × (1 − ReleaseAtHandover%)
Revenue views:
CashRevenueAtHandover = RevenueRecognized − RetentionRemaining
Costs and margins:
MarginRecognized% = (RevenueRecognized − TotalHandoverCosts) ÷ RevenueRecognized × 100
MarginCash% = (CashRevenueAtHandover − TotalHandoverCosts) ÷ CashRevenueAtHandover × 100
This calculator is a scenario tool. Align inclusion of tax, reserves, and overheads to your project accounting policy.
- Enter the base contract value and net variations.
- Add claims likely to be agreed and any deductions expected.
- Set retention rate and how much is released at handover.
- Input costs to date plus closeout, overheads, and contingency.
- Review both recognized and cash margins, then export.
| Project | Net contract value | Total handover costs | Retention remaining | Recognized margin | Cash margin |
|---|---|---|---|---|---|
| Commercial Fit-Out | USD 525,000 | USD 407,000 | USD 13,125 | 22.48% | 19.97% |
| Residential Tower Podium | USD 1,240,000 | USD 1,115,000 | USD 31,000 | 10.08% | 7.45% |
| Roadworks Package | USD 780,000 | USD 812,000 | USD 19,500 | -4.10% | -6.73% |
Why handover margin matters
Handover margin shows the profit position at practical completion, before the final account is fully agreed. It helps teams decide whether to add closeout resources, challenge deductions, or accelerate remaining works. A 2% swing on a $1,000,000 scope equals $20,000, which can exceed an entire snagging budget on many projects in real terms.
Retention and release assumptions
Retention commonly ranges from 3% to 10% of the net contract value and is often split between handover and the end of the defects period. If 5% is withheld and 50% is released at handover, the remaining holdback equals 2.5% of revenue. That reduces cash margin and affects working capital planning. Track certification timing, reduce surprises.
Closeout and reserve planning
Closeout costs typically cover commissioning, as-builts, O&M manuals, testing, demobilization, and minor remedials. For fit-out or MEP-heavy scopes, closeout plus reserves frequently fall between 1% and 3% of net revenue, depending on client documentation standards. Adding a defects reserve of 0.5% to 1.5% protects margin from late rework. Use historical punch-list data to size it.
Recognized versus cash margin
Recognized margin compares revenue to forecast handover costs, while cash margin also subtracts any retention still held after handover. Cash margin is therefore more conservative and helps plan liquidity. On high-retention contracts, a positive recognized margin can still create negative cash at handover. Stress-test different release percentages and tax inclusion rules before final account settlement too.
Practical actions before handover
Improve margin by closing subcontract accounts early and validating variation support weekly. Reconcile purchase orders to remove hidden commitments, and track preliminaries burn rate against the handover programme. Agree responsibility for defects with each trade and document closeout deliverables. If contingency remains, release it explicitly with evidence and approvals so it is not absorbed by aftercare for the project team.
What is a handover margin?
It is the forecast profit percentage at practical completion, calculated from expected revenue at handover minus total forecast handover costs. It helps teams judge whether closeout spending, deductions, or claims will materially change the final account outcome.
Should I include tax in the margin?
Most teams exclude VAT or sales tax from revenue because it is collected on behalf of authorities. If your internal reporting includes tax, enable the tax option for consistency, but compare like-for-like across projects.
How do I choose a retention release percentage?
Use your contract terms or client practice. Common patterns release 50% of retention at handover and the balance after the defects period. If releases are delayed, reduce the release percentage to stress-test cash exposure.
What costs belong in closeout?
Include commissioning, testing, documentation, demobilization, final cleaning, minor rework, temporary works removal, and any specialist support required for handover. Exclude costs that are clearly post-handover operations unless you also reserve for them.
Why does cash margin differ from recognized margin?
Cash margin subtracts any retention still held after handover, so it reflects cash available at that point. Recognized margin ignores that timing effect. High retention or slow certification can make cash margin noticeably lower.
What if my margin is negative?
Check deductions, confirm variation entitlement, and validate remaining costs and reserves. Then build an action plan: close open commitments, renegotiate scope gaps, and prioritize defects prevention. Use scenarios to see which levers move the result most.
Can I use this for monthly reporting?
Yes. Update revenue forecasts, retention assumptions, and cost-to-complete each month. Keep the cost categories consistent so trend lines are meaningful. Export the CSV/PDF to attach to your project controls pack.