How to Ace Your CVR as a Quantity Surveyor

Today, we’ll explore an essential topic for any quantity surveyor—how to ace your Cost Value Reconciliation (or CVR). Mastering the CVR process is vital to ensuring your project’s financial health and profitability.

What is CVR?

Let’s start by defining CVR. Cost Value Reconciliation is a crucial financial reporting process that compares the costs incurred with the value of the work completed. This helps identify discrepancies, allowing you to take corrective actions before they affect project outcomes. It’s particularly useful in forecasting cash flow and optimising financial performance.

Why it’s Important for a QS

As a quantity surveyor, your role in the CVR process is indispensable. A CVR gives you insights into project performance, ensuring transparency in costs, profits, and potential risks. When done correctly, it can provide key information that guides financial decisions, keeps stakeholders informed, and maximises project profitability.

Step-by-Step Process for Acing Your CVR

Here’s a step-by-step guide to acing your CVR:

1. Accurate Data Collection: Begin with precise, up-to-date cost data. Capture all relevant costs, including labour, plant, materials, subcontract costs & indirect expenses, ensuring nothing is missed. Accuracy at this stage is critical for the success of the CVR.
2. Clear Valuation of Completed Work: Assess the value of work completed – normally this involves visiting site and checking that the work has been carried out by visual inspection and/or measurement. Be sure to stay conservative when estimating to avoid overvaluing.
3. Provision for Future Costs: When comparing costs with the value of work, ensure you make provisions for costs that are related to completed work but have not yet been incurred. This is achieved through accruals, ensuring costs and value align within the same reporting period.
4. Variance Analysis: Investigate any variances between cost and value. This could stem from price fluctuations, underperforming subcontractors, or delays. It’s vital to understand why these variances occur so corrective actions can be taken.
5. Action Plan: Develop and implement an action plan to manage variances. This might involve renegotiating terms with suppliers, adjusting project timelines, cutting down on expenses where possible or investigating potential claims.
6. Report to Stakeholders: Finally, prepare a report for stakeholders, ensuring transparency in both the data and your recommendations. Clear communication is vital to prevent surprises and manage expectations.

Common Pitfalls to Avoid

Now let’s explore some common pitfalls to avoid. You won’t want to miss this part, so make sure to continue watching!

1. Inconsistent Updates: Ensure you perform CVRs regularly, on a monthly basis at minimum, to avoid financial surprises down the line. Regular reviews give you a clear view of a project’s financial health
2. Overvaluing Completed Work: Avoid inflating the value of work done under pressure. This can lead to an incorrect picture of the project’s financial health, fueling complacency among stakeholders.
3. Ignoring Small Variances: Don’t dismiss small variances—they can accumulate into significant problems. Address every variance promptly to ensure accuracy and control.

Conclusion

To ace your CVR as a quantity surveyor, attention to detail is crucial. Regular updates, a focus on accuracy, and clear communication with stakeholders will ensure your projects stay financially healthy and on track. By following these steps and avoiding common pitfalls, you’ll be well on your way to mastering the CVR process and driving project profitability.