Home > Accounting Glossary > Gross Profit Fade
Gross Profit Fade: Definition and Meaning
Definition
Gross profit fade is a decline in expected gross profit on a construction job compared with an earlier estimate or the original bid.
Why It Matters
Profit fade can indicate changes in labor productivity, material costs, subcontractor performance, project scope, estimates, scheduling, weather, change orders, or other job conditions. Identifying fade early can give management more time to investigate and respond.
The analysis depends on timely job-cost information, current cost-to-complete estimates, and communication among project managers, estimators, operations, and accounting.
Example
A job was originally expected to earn $100,000 in gross profit but is now expected to earn $70,000. The $30,000 decline is gross profit fade.
Related Terms
TYS provides accounting, tax, construction-accounting, and business-advisory support to closely held businesses, contractors, individuals, and families. With offices in Fairport, New York, and Walnut Creek, California, TYS helps clients better understand their financial information and prepare for important decisions.
Have a question about Gross Profit Fade or your business’s financial reporting?
Contact TYSThe information on this page is provided for general educational purposes only and is not accounting, tax, legal, financial, insurance, bonding, or business advice. Consult qualified professionals regarding your particular circumstances.
Back to the Accounting Glossary →