Tagging a few Searchfunders that have commented on the Construction industry in the past and might be able to answer your question about "Cost to completion" here:

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To our friends with knowledge/opinions of construction accounting, THANK YOU for helping to make Searchfunder a collaborative community! Be sure to take full advantage of your UNLIMITED access to IBISWorld (Searchers only) & BVR Deal Stats, now available under the INDUSTRIES & VALUATIONS tabs at the top of this screen. Here are the direct links:

www.searchfunder.com/ibisworld

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With Best Wishes, ^[redacted]‌

Hi Chin, I have. There's software that will do this for you when you input a new project but you need to understand what it's doing and how in order to use that functionality accurately. Contact me and we can set up a Zoom call since you're outside the US.

Hi Chin. I understand the % completion method from M&A perspective, but I have not implemented one

Chin are you asking about how to account for % completion for an existing business that you are already running? Or is this for a potential acquisition?

"Percentage of Completion" revenue recognize can be based upon relative costs (i.e. total cost incurred compared to total cost budgeted) or alternatively, engineering analysis based upon physical work completed. The latter is far more reliable and arguably critical given the investment risk. Also, when projecting cash flows, keep in mind (in the U.S.), the percentage of completion recognition of revenue and expenses for [lender] financial statement purposes is not the same as the methodology used for U.S. tax reporting purposes.

Generally most construction project contracts include a Schedule of Values which is used for progress billings. This is a very good way to measure percent complete. I encourage you to use this metric in your LOI as a means of definitizing percentage completion.

It is not that difficult to implement since if you use an AIA (American Institute of Architects) payment requisition, your schedule of values are used as the basis of progress payments. The challenge is the over-billing and under-billings for revenue recognition purposes. Can you elaborate what you are looking for?

It really comes down to budgeting and tracking, establishing milestones, etc. Happy to talk more about it.