Financial Closeout Procedure

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: Project Managers, Accounting

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Purpose

Establish procedures for completing project financial closeout to ensure all costs are captured, revenues collected, and profitability calculated.

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Financial Closeout Timeline

Activity	Timing
Final change orders	Before final billing
Sub final payments	Within 30 days of completion
Final pay application	Per contract
Retention collection	Per contract
Cost reconciliation	Within 60 days
Profit/loss analysis	Within 90 days
Job closeout	Within 120 days

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Financial Closeout Steps

Step 1: Process Final Change Orders

Before Final Billing:

• All change orders submitted
• All change orders approved
• All change orders billed
• No pending changes

Step 2: Finalize Subcontractor Payments

For Each Subcontractor:

• Final pay application received
• Punch list complete
• Backcharges processed
• Final lien waiver collected
• Final payment processed

Step 3: Finalize Vendor Payments

For Each Vendor:

• All invoices received
• All invoices paid
• Credits applied
• Accounts closed

Step 4: Submit Final Pay Application

Final Billing Includes:

• All remaining contract work
• All approved change orders
• Retention release request
• Final lien waivers

Step 5: Collect Final Payment and Retention

Track:

• Final payment received
• Retention received
• All funds collected

Step 6: Reconcile Job Costs

Compare:

• Budget vs. actual (by cost code)
• Identify variances
• Explain significant differences
• Document lessons learned

Step 7: Calculate Final Profit/Loss

Financial Summary:

• Total contract value
• Total costs
• Gross profit
• Gross margin %

Step 8: Close Project in System

Final Actions:

• Close all purchase orders
• Close job in accounting
• Archive project files
• Complete closeout report

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Job Cost Reconciliation

Cost Comparison:

Cost Code	Budget	Actual	Variance	%
Labor
Material
Equipment
Subcontract
Other
TOTAL

Variance Analysis:

• Identify major variances (> 5%)
• Determine causes
• Document for future estimates

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Financial Closeout Checklist

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        PROJECT FINANCIAL CLOSEOUT CHECKLIST
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Project: _____________________ Project #: ____________________

PM: _________________________  Close Date: ___________________

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CHANGE ORDERS:
☐ All COs submitted
☐ All COs approved
☐ All COs billed
☐ Final CO log complete

SUBCONTRACTORS:
☐ All final pay apps processed
☐ All backcharges processed
☐ All final lien waivers collected
☐ All final payments made

VENDORS/SUPPLIERS:
☐ All invoices received
☐ All invoices paid
☐ All credits applied

BILLING:
☐ Final pay application submitted
☐ Final payment received
☐ Retention received
☐ All funds collected

JOB COSTS:
☐ All costs posted
☐ All time charged
☐ Cost reconciliation complete
☐ Variances analyzed

FINANCIAL:
☐ Profit/loss calculated
☐ Margin % calculated
☐ Closeout report complete

ADMINISTRATIVE:
☐ Job closed in accounting system
☐ POs closed
☐ Files archived
☐ Lessons learned documented

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FINAL PROJECT FINANCIAL SUMMARY:

Original Contract:         $____________________
Change Orders:            $____________________
Final Contract Value:     $____________________

Total Costs:              $____________________

Gross Profit:             $____________________
Gross Margin:             ________%

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PM Signature: _______________________  Date: _________________

Accounting: _________________________  Date: _________________

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Profit/Loss Analysis

Final Project P&L:

CONTRACT REVENUE:
  Original Contract         $__________
  Change Orders             $__________
  Total Revenue             $__________

DIRECT COSTS:
  Labor                     $__________
  Material                  $__________
  Equipment                 $__________
  Subcontracts              $__________
  Other Direct              $__________
  Total Direct Costs        $__________

GROSS PROFIT                $__________

GROSS MARGIN                ________%

INDIRECT COSTS:
  General Conditions        $__________
  Warranty Reserve          $__________
  Total Indirect            $__________

NET PROFIT                  $__________
NET MARGIN                  ________%

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Related Documents

• Final Pay Application
• Retention Release Request
• Sub Final Payment Process
• Lessons Learned Report

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