Contract Financial Management
Boosting business success through tailored financial management: Ensuring profitability and compliance in every contract endeavour.
Contract Financial Management
Make sure every contract earns the profit and value you planned for.
Our contract financial management service helps suppliers and buyers keep control of the money in live contracts. We build cost and pricing models, report contract profit and loss, price changes, audit prices and manage supplier spend, so actual costs stay in line with estimates. For Unsung Ltd, we built every financial model, including cost build-ups, pricing and sensitivity analysis, for a £2m Ministry of Defence contract. Book a consultation to review your contract financials.
What is contract financial management?
Contract financial management is the oversight and improvement of the financial side of contracts. It aims to keep estimated and actual spending in line, so contracts are both profitable and good value for money.
By analysing the profit and loss account for a contract, you can see the net profit it generates, calculated using established methods. You can then make decisions that improve the financial result.
Contract financial management covers live contracts after award. If you are pricing a bid before award, see our bid financial modelling service.
What's included in our contract financial management service
A successful contract depends not just on the terms agreed, but on how well its finances are managed. Drawing on over a decade of experience, we offer joined-up services to support, improve and transform your contract financials. You can use the full service or pick the elements you need.
Financial modelling
We build cost and pricing models tailored to the nature of each contract.
Pricing audits
We check value for money through audits against best practice and the contract terms.
Financial analysis for net profit
We find where value is leaking and recommend how to reduce costs. Alongside cost reduction, we analyse revenue streams, including revenue from product sales, so you understand the full financial picture.
Change proposals and approvals
We prepare the financial position for each change proposal, making sure it follows the contract's pricing principles.
Contract performance review
We give you insight into the financial performance of each contract, supporting profit and loss reporting.
Operational and supplier spend management
From overseeing supplier performance to challenging prices, we make sure you get value at every stage.
Risks and contingencies
We review financial and pricing risks in full and set out how to reduce them.
Assumptions and dependencies
We highlight the opportunities and pitfalls in your financial assumptions and dependencies, with practical plans to act on them.
Supplier financial management
We provide tools and approaches to improve supplier performance and control supplier costs.
Price audit and benchmarking support
We support price audits and benchmark your prices, so you know you are getting a fair deal. Good price audits also look at revenue from product sales, so your pricing stays competitive.
Not sure whether a contract is making money? Book a consultation and we will help you find out.
How we work
We work remotely reviewing your models or on site alongside your teams, whichever suits you. Our engagements follow five steps.
- Understand the contract and its finances. We review the contract's pricing terms, payment mechanisms, cost base and current reporting. Output: financial baseline for the contract.
- Build or review the financial model. We create or check the cost and pricing model, including assumptions, dependencies, risks and contingencies. Output: validated contract financial model.
- Set up profit and loss reporting. We put in place a contract P&L, cost collection and regular reporting, using standard templates and automating cost collection where possible. Output: contract P&L and reporting pack.
- Find and fix value leakage. We analyse costs, revenue, supplier spend and prices, and recommend actions to protect margin. Output: prioritised savings and recovery plan.
- Manage change and keep improving. We price change proposals, support audits and update the model and reporting as the contract evolves. Output: priced changes and updated forecasts.
Understanding profit and loss in contracts
Understanding profit and loss in contracts helps businesses make informed decisions and stay financially stable. A profit and loss account for each contract shows the income and costs of that agreement over a set period. This focused view of the contract's financial performance shows you where to control costs and raise profit. By monitoring it closely, you can work out the net profit from the contract and take action to improve it.
Managing contract costs, revenue and payment milestones well keeps the profit and loss healthy, while strong risk management protects against financial surprises. Meeting expected profit is crucial to the success of a contract. Getting the value you expected means hitting financial targets and also reducing liabilities and related risks. By dealing with these early, you keep each contract's profit and loss in line with your strategic goals, supporting growth and stability.
Calculate contract profit accurately
Contract financials can seem daunting. With proper management, they become a tool to improve profit, customer satisfaction and contract performance. Athena Commercial offers a range of financial management services that give you the tools and insight to make informed decisions.
Proof: results from our contract financial work
£20m incentivisation model designed for Villicare
Villicare needed a commercial solution to achieve significant cost savings over five years, with incentives aligned for profit-sharing with its end customer. We designed the commercial model and solution structure, agreed the commercial principles with the end customer, developed the financial models and drafted the contract and supporting schedules. - Result: a £20m incentivisation model built to hit the 5-year target cost savings, with a profit-sharing mechanism. - Read the Villicare case study
£2m MoD contract with full financial modelling for Unsung Ltd
Unsung Ltd needed experienced commercial support to win and set up a cyber security contract with the UK Ministry of Defence. We developed all the financial models, covering cost build-ups, pricing structures and sensitivity analysis, and aligned third-party agreements with prime contract obligations and delivery milestones. - Result: £2m contract awarded, built on a commercially robust financial model. - Read the Unsung Ltd £2m case study
More contract financial results
- MSA and operating model for Dukebridge, including a standard financial model and automated financial reporting.
- £9m saved through a revised contract model for Fujitsu.
- £250k immediate savings and £1m more identified for Block Solutions.
- £1bn in bids for SDH Project Services, including cash flow models for a ~£60m funding round.
Our own framework credentials
- G-Cloud 14 – Athena secures a place on G-Cloud 14
- DOS 7 (Digital Outcomes and Specialists), Lots 1 and 3 – Athena awarded a place on DOS 7
Sectors we support
Defence
Defence contracts often use complex pricing, long terms and strict audit rules. We build cost models, sensitivity analysis and pricing structures that stand up to scrutiny, as we did on MoD contracts for Unsung Ltd. Our team holds Security Check (SC) clearance.
NHS and health
Health contracts must show value for public money. We help suppliers and health bodies track contract costs, evidence pricing and report profit and loss clearly, including on open book and incentivised contracts like the model we designed for Villicare.
Construction
Construction contracts live or die on cost control, valuations, variations and cash flow. We price changes against the contract principles, track actual against estimated cost and help protect margin. See our guide to managing supply chain cash flow.
Technology
Technology contracts mix licences, services and hardware with changing volumes. We model costs and revenue across these elements, audit supplier pricing and benchmark it, so you are not overpaying.
