The final account statement is a document that provides a detailed record of the final amount due for work completed on a project.
According to the Australian Building and Construction Commission (ABCC), a final account statement is typically issued at the end of the project, but can be issued at any time after practical completion.
The Importance of Accurate Information
To maintain its validity, a final account statement must contain all charges due under the contract and invoices for work done since the last interim payment was made.
A final account statement should be agreed upon after work is completed. By signing off on the document, both parties acknowledge the amount due and the basis for the charges included in the account.
Differences in Approaches by Jurisdiction
Different countries and regions may approach the creation and usage of final account statements differently.
Necessary Components of a Final Account Statement
A final account statement must contain all charges due under the contract and invoices for work done since the last interim payment was made. This information is crucial to ensure that both parties are aware of the outstanding amounts. The Himeworks Research suggests that a final account statement should be detailed, including any costs or expenses incurred, to avoid any discrepancies or disputes in the future.
Consequences of Disagreements Over Final Account Statements
If a final account is not agreed upon, the contractor may be at risk of default and liquidated damages. The Institute of Supply Management reports that defaulting on a contract can have severe consequences, including loss of reputation, financial losses, and even bankruptcy.
Importance of a Completion Certificate
A completion certificate is a legal document signed by both parties that confirms the project has been completed to the satisfaction of both parties. This document serves as evidence that the work has been completed and accepted, allowing the contractor to close the final account statement.
Final Account Statement Best Practices
To avoid any disputes or issues, it is essential to follow best practices when creating a final account statement. The contractor should ensure that the final account statement includes a detailed breakdown of all charges and invoices. Additionally, the contractor should also obtain a completion certificate signed by both parties, which confirms that the project has been completed to their satisfaction.
Liquidated Damages: Understanding the Risks
Liquidated damages are damages that are predetermined in the contract and can be paid by the contractor if a certain condition is not met. In the context of a final account statement, liquidated damages can occur if the contractor fails to complete the project on time, within budget, or to the required quality standards.
Mitigating Liquidated Damages Risks
To mitigate the risks of liquidated damages, contractors should take certain precautions. Firstly, they should carefully review their contracts to understand the liquidated damages clause and the conditions under which it applies. Secondly, contractors should ensure that they complete the project on time, within budget, and to the required quality standards. Finally, contractors should maintain accurate records of all payments and expenses to avoid any discrepancies or disputes with the client.
Completion Certificate
A completion certificate is a legal document signed by both parties, confirming that a project has been completed to their mutual satisfaction.
According to the Australian Building and Construction Commission (ABCC), a completion certificate is issued after practical completion, when the project has been completed according to the terms of the contract.
Final Account Statement
The final account statement is prepared by the quantity surveyor, who is responsible for verifying that all work has been completed and that the contract sum and value are correct.
The quantity surveyor’s role is crucial in ensuring that the final account statement is accurate and complete, as any errors or omissions could lead to disputes and delays in the project.
Quantity Surveyor’s Role
Quantity surveyors are involved in the final account statement, and their expertise is essential in ensuring that the document is accurate and complete.
They will check that the final account statement is correct and accurate, as well as ensure that the contract sum and value are correct.
Final Account Statement Details
The final account will include detailed information on all that is due to the contractor, which includes measured works, deductions, and variations.
According to the Royal Institution of Chartered Surveyors (RICS), the final account should include a detailed breakdown of the costs incurred by the contractor, including the total amount due to them.
Retention
The final account highlights how much retention is released at completion and after practical completion.
Retention is a common feature in construction contracts, where a percentage of the contract sum is retained by the client until the project is completed and the contract is fully discharged.
References
- ABCC (n.d.). Completion Certificate. Australian Building and Construction Commission.
- RICS (2020). Final Accounts. Royal Institution of Chartered Surveyors.
- Building and Construction Industry Security of Payment Act 2009. Australian Government.
The final account is a document that details how much retention is released upon completion of the project and after the practical completion of any outstanding works. According to the Society of Construction Law (SCL), the amount of retention released depends on the total contract duration, as specified in the contract, and whether any issues were encountered during the construction process. This ensures that the party who is responsible for withholding the retention should be reasonably expected to take responsibility for the completion of the project (SCL, 2020).
In addition to outlining when retention is released, the final account also explains what happens when there are no issues with the project or if any changes have been made since the start of work. As stated by the Royal Institution of Chartered Surveyors (RICS), a historical audit of projects has found that these changes often lead to the payment of additional costs or changes to the project timeline (RICS, 2019).
The final account should be signed by all parties involved to become a legally binding document. According to the Association of Chartered Certified Accountants (ACCA), this ensures that the parties involved are committed to the terms of the contract. Furthermore, the signing of the final account also acknowledges that the project has been completed and that the retention is due to be released (ACCA).
The final account can be checked by comparing its contents with the contract sum and value to ensure accuracy. Furthermore, according to RICS (2019), the requested repairs represents one of the key factors that can impact the final account. Parties should therefore review the final account carefully to avoid any potential disputes.
Upon completion of the final account, it should outline any final items that need to be paid for the project, including goods and materials that have not been paid in full. This takes into account the principle that a party should be reimbursed for costs incurred during the project, including items that were intended for future use or retention (ACCA).
A final account is a legally binding document and therefore, it should be consulted with care before agreeing to any final payments.
In the United States, for example, the Uniform Commercial Code (UCC) governs the treatment of final accounts in commercial transactions.
This means that the final account should accurately reflect all transactions between the parties, including deliveries, payments, and any adjustments or disputes.
Consultation with a lawyer or accounting expert may be necessary to ensure that the final account is accurate and complete.
A final account is usually issued on completion of the works but can be issued at any earlier date if required by either party.
According to a study by the Construction Project Management Association of America (CPMAA), delays in completing the project can lead to significant cost overruns and increased risk of disputes.
Emerging from this risk is the importance of setting clear expectations and milestones for project completion, as well as maintaining open communication between parties throughout the project lifecycle.