Creating Change Orders

Understanding Financial Rounding in ConstructionOnline™

Discover more about rounding during financial calculations in ConstructionOnline™

Rounding is a basic mathematical process that simplifies a number into a more concise or comprehensible format. When dealing with money and financial calculations, rounding is used to simplify numbers that contain extra decimal places, as these fractions cannot be represented as a valid monetary amount.

For example, in the United States, the smallest fraction of currency is a cent, or $0.01 dollars. This means that an amount to be paid cannot exceed more than 2 decimal places, as there is not a currency that is small enough to account for these amounts. With rounding, you can adjust a non-representable amount of money and replace it with an amount that can be transacted in your country's currency. 

However, financial calculations that deal with high precision amounts can result in a frustrating rounding dilemma—when should numbers be rounded during calculations? To understand how the timing of rounding can affect the precision and accuracy of your calculations, let's break down an example.

Change Order Example

Your client has requested a new style of bathroom flooring that was not originally included in the project's scope of work. Because this modification is different from the original agreement, you need to fill out a change order to document the new request and additional costs. This particular style requires two different types of tile. The first type of tile costs $23 per square foot and you need 50.075 square feet of the tile. The second type of tile costs $15 per square foot and you only need 5.075 square feet of the tile. You need to calculate the total cost of each tile (unit cost x quantity), then add them together to get a client price. 

You have two options––you can round before adding the two materials together, or you can round later once all calculations are complete. If you round each component now, there is a chance that the client price will be fractionally higher than rounding at the end. Rounding during calculations loses precision, which can result in inaccurate values. 

Option 1: Rounding before

Tile 1: $23 x 50.075 = $1,151.725

$1,151.725 $1,151.73

Tile 2: $13 x 20.075 = $260.975

$260.975 → $260.98

$1,151.73 + $260.98 = $1,412.71

Client price is $1,412.71

Option 2: Rounding after

Tile 1: $23 x 50.075 = $1,151.725

Tile 2: $13 x 20.075 = $260.975

$1,151.725 + $260.975 =  $1,412.7

$1,412.7 → $1,412.70

Client price is $1,412.70

Notice how there is a one cent difference between the two results! To ensure financial calculations are as precise as possible, ConstructionOnline rounds after all calculations are complete

Rounding in ConstructionOnline

ConstructionOnline follows the following guidelines for rounding during all financial calculations.

  1. All values are stored with 6 decimal places, but displayed as rounded values. For maximum precision, all values in ConstructionOnline are considered to have 6 decimal places. This is also the optimal level of detail for importing values to QuickBooks. 
    1. For example: if a calculated total is 100.555, the system will internally store the value as 100.555000 and display the value as $100.56. These extra decimal places cannot be seen by users, but ensure that all calculations are performed with high levels of precision. 
  2. For most* displayed values, ConstructionOnline uses the traditional method of rounding to round values to two decimal places.
    1. When a numeric value is less than 5, it is rounded down. For example, $3.012 would be rounded to $3.01. If a numeric value is exactly equal to 5 or greater than 5, it is rounded up. For example, both $3.015 and $3.019 would be rounded to $3.02. 
  3.  Values are rounded at the very end of calculations. Due to the high level of precision achieved by 6 decimal places, the system will perform any necessary rounding at the very end of a calculation. This rounded value is the value that is displayed in ConstructionOnline, while the system stores the exact value for future calculations. 

Rounding Method Exception: Invoicing does not use the traditional method of rounding. All displayed values in Invoicing are rounded using the ceiling method, which rounds numeric values to the next greatest integer. Since Invoices are directly associated to payments, the ceiling method is the most accurate way to ensure payment in full.

For example, both $300.012 and $300.019 would be rounded to $300.02. 

Because of the application of the financial rounding methods outlined above, minute discrepancies may sometimes appear in very rare instances. These instances are generally the result of calculating complex values that have been rounded due to tax or quantity values or the proration of Company Overhead & Margin. 

Let's go back to our change order example from before. ConstructionOnline will display the total cost for each type of tile as a rounded number, but will use the precise number during calculations. This means that the final client price may or may not appear a few cents off in the system. There are no calculations errors here, just visual discrepancies due to rounding!


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