More Work, Less Profit: Which Jobs to Accept, and the Contract Terms That Quietly Turn Jobs into Losses

Design studios, contract manufacturers, contractors, agencies and many service businesses show the same signs. The team is busy all the time, purchase orders keep coming in, yet at year-end the profit has not grown. So the owner keeps accepting work for fear of a gap, even though some kinds of work eat the profit of other work.

The price you first quoted is not the profit on the job. The real profit on a job is what is left after deducting the labour actually used, rework, out-of-scope work you never charged for, penalties, the cost of money tied up waiting for the customer to pay, and the jobs you had to turn down because people were not free. This guide walks through calculating profit per job and points out which contract terms turn a good-looking job into a loss.

The core answer

Accept work whose profit, after the hidden costs, is still worth your team's time and whose contract closes the main risks. A job with a good price but a floating scope, unlimited rework, slow payment or heavy penalties usually does not pay once everything is counted. The fix is not to refuse every difficult job, but to set the scope and the way work is changed in writing, and to set decision criteria in advance.

The rule (Thai law). A contract for work under section 587 of the Civil and Commercial Code is a contract in which the contractor agrees to accomplish a certain work for the employer, and the employer agrees to pay remuneration for the result. The contractor is liable for defects in the work under section 600 within the period the law sets unless the contract agrees otherwise, and the limitation period for suing is in section 601. Penalties are governed by section 379, and a court may reduce them under section 383.

Our practical view. A contract for work is measured by result. If the contract states the result broadly and has no rounds of revision, the contractor gets pulled into working on and on. So write the result so that it can be measured, agree the number of revision rounds, and state that work beyond that needs a variation order.

1. Profit per job: what to calculate

Pick 5 to 10 jobs that have closed and build a comparison table from real data, not from quoted prices.

From this table you will often see a pattern: which type of customer, which type of job, or which step is where the profit disappears. Then you decide whether to fix the price, fix the contract, or stop taking that type of job.

One caution: do not use the gross margin on the quotation as the benchmark, because it does not include the labour consumed by rework and out-of-scope work. Your accountant can help set up costs per project if you log time and keep documents systematically, but interpreting the figures for a business decision belongs to the owner.

2. Hidden costs that often turn jobs into losses

2.1 A floating scope

An order that says "design a website", "install a system" or "produce to sample" does not say what is included or excluded. The customer tends to read it broadly, the team reads it narrowly, and the dispute starts when the invoice is due. A good quotation has three things: what is included, what is excluded, and what the customer must prepare.

2.2 Rework without a ceiling

If the contract lets the customer ask for changes "until satisfied", the contractor has no test for when the work is finished. State the number of revision rounds included in the price and charge extra beyond that, and separate defects, where the work departs from the specification and the contractor must fix them for free, from changes in what the customer wants, which are new work.

2.3 Retention money and the final instalment

The last portion tied to "final acceptance" or "warranty" can be held far longer than expected. Set clear terms for its return, the return date and what counts as handover. See retention money not returned.

2.4 Penalties and damages

A daily late-delivery penalty bears directly on profit, because even a small delay can eat the profit on the whole job. Negotiating penalties, set-off and liability caps is covered in the guide to checking a big customer's contract, so we do not repeat it here. The one point to stress is to ask which side the delay came from. If it came from the customer, for example late information or late approval, you must get an extension and not be penalised.

2.5 Slow payment

A customer who pays late is a real cost, because money that should be circulating is held. See profitable but short of cash for managing the cash cycle, and unpaid invoices when a customer does not pay.

2.6 Opportunity cost

A team booked by poor jobs is not free for better-paying ones. This cost does not appear in the accounts, but it is the reason to have criteria for turning work down.

3. Legal points on accepting and delivering work

3.1 The contract for work (section 587)

When you are a contractor, you agree to accomplish the work, which differs from an employment contract or a service contract charged by time. The consequence is that if the work is not accomplished as agreed, you may not be entitled to the full remuneration and may be liable for damages. So the character of the contract you write, whether it is work that must deliver a result or a service charged by time, bears directly on your risk. On pricing each model, fixed price, hourly or monthly, see pricing service work.

3.2 Liability for defects (sections 600 and 601)

The contractor is liable for defects in the work that appear within the period the law sets from the date of delivery, which for some kinds of building is longer than for ordinary work, unless the contract provides otherwise, or if the contractor concealed the defect, in which case liability may not be limited by that period. Section 601 bars an action once 1 year has passed from the date the defect appeared. How the period is counted and the conditions depend on the facts and the case law, so have a lawyer check before relying on it in a real case.

In practice, a large customer's contract often sets its own warranty, which may be longer than the law and counted from a date the customer controls. So set a start date that can be verified, state the remedy the contractor may choose, such as repair or replacement, and exclude defects caused by misuse or by modification by others.

3.3 Acceptance

The employer must inspect and accept the work under the contract. Taking delivery without objection affects later claims. So the contractor should set the acceptance process out in writing, with measurable criteria, the time the customer has to respond, and a clause that the work is deemed accepted if there is no objection within that time. Conversely, the contractor should have proof of every delivery.

3.4 Penalties (sections 379 and 383)

The parties may agree a penalty, and a court may reduce one that is disproportionately high, but a reduction needs a fight in court. The contractor should therefore negotiate a cap and exceptions before signing.

3.5 Tax and documents

Issuing a tax invoice before payment in a service business may mean remitting value added tax before the money comes in, as explained in profitable but short of cash. Your accountant should help check when the contract has instalments or a deposit.

4. The variation order

A variation order is a short document that agrees how work is to be added, reduced or changed, and what effect that has on the price and delivery date. It is the best tool for avoiding working for free.

Terms to include:

• Every item beyond the original scope needs a variation order approved by the customer in writing before work starts.
• Name the customer's authorised people who can approve, not just anyone who sends an email.
• State that the order must show the work items, the price or the method of calculating it, and the effect on the delivery date.
• State that if the customer instructs work to begin before approval in order to speed things up, the customer accepts that it will pay at the agreed rates.

Sample clause (illustration only, to be adapted to the actual job)

Clause ... Changes to the work
(1) Any work outside the scope in Annex A is additional work.
    The Contractor has no duty to start additional work until the Employer
    signs, or confirms by email through a person authorised under clause ...,
    a variation order.
(2) A variation order must state the work items, the remuneration and the
    effect on the delivery date.
(3) If the Employer asks for work to start before signing, the Employer agrees
    to pay for the additional work at the rates in Annex B.
(4) The delivery date is extended by the period the Employer is late in
    providing information or giving approvals as agreed.

A suggestion: this also works with small customers who communicate mainly by LINE. Turn the discussion into a summary message that the customer taps "agree" on, and keep a screenshot. But the person who approves must be someone who can bind the customer's company. See who can bind your company.

5. Checklist for accepting or declining a job

Before accepting, answer these questions with real data.

Money

• Does the price cover the full cost, including rework and the time actually spent?
• What are the payment terms? Is there a deposit or staged payments? Does the customer have a record of paying on time?
• Are there deductions from invoices or retention money held for a long time?

Scope and risk

• Is the scope clear enough to say when the work is finished?
• Is there a ceiling on rounds of revision, and a variation order procedure?
• Is the penalty capped, and excused when the customer is the cause?
• Is your liability capped?

Capacity and strategy

• Will this job force you to refuse a better one?
• Does the team have enough expertise, or is there new learning that makes the cost higher than you think?
• Does the job open the way to better customers, or only add to the load?
• Does the job make you too dependent on a single customer? See depending on one big customer.

Decision rule

Set in writing in advance that if any money question fails, the price or terms must be adjusted; if 2 or more risk questions fail, the terms must be negotiated before accepting; and if the customer will not change them, decline. These thresholds belong to each business. Setting them beforehand helps you decide when the customer is pressing.

6. How to decline or propose new terms without losing the customer

• Offer an alternative with a reduced scope instead of saying you cannot do it, for example do the first phase first.
• Quote two tiers: a basic tier that excludes unlimited revisions, and a tier with a warranty and extra revisions.
• Ask for a deposit or first instalment as a condition of reserving capacity.
• Give a business reason, such as the team being fully booked, or that these terms make it impossible to guarantee quality.
• Close with terms you can accept. Many customers agree when they see the proposal is reasonable.

7. Adjust your contracts and internal process to protect profit

Standard terms to have in your own template:

1. The scope of work and what is excluded
2. The customer's duties, such as providing information, materials and site access on time
3. The number of revision rounds included in the price
4. The variation order
5. Acceptance and deemed acceptance
6. The payment date and the effect of late payment
7. Warranty and when it starts to run
8. A liability cap and exclusion of indirect loss
9. Cancellation by the customer and payment for work already done
10. Ownership of the work on full payment

Internally, have a contract approval step before signing. See contract review and approval without a legal department, and record the actual hours spent on each job so the next profit assessment is more accurate.

8. Build a business with steady income instead of one-off jobs

If the analysis shows that one-off project work is volatile and consumes a lot of capacity, consider a model where revenue is more predictable, such as monthly contracts or maintenance contracts. See from one-off projects to monthly recurring revenue, and for an overview of business models and their legal effects, the business model guide for Thai SMEs.

9. Summary checklist

• Pick 5 to 10 closed jobs and calculate real profit including rework and out-of-scope work.
• Know which type of customer or job eats the most profit.
• Quotations state what is included, what is excluded and what the customer must prepare.
• The number of revision rounds included in the price and the charge for extra rounds are set.
• There is a variation order form and it is used every time before extra work is done.
• Penalties are capped, excused when the customer is the cause, and the sole remedy for that delay.
• The warranty period starts from a date that can be verified, not one the customer controls.
• There is a deposit or staged payments, with payment terms tied to provable events.
• There are written criteria, set in advance, for accepting or declining work.
• Hours and costs per project are recorded and reviewed every quarter.

Further reading

• Checking a big customer's contract before signing penalties, deductions, liability caps and acceptance
• Contractor retention money not returned when the final instalment is held back
• Profitable but short of cash the cash cycle and contract terms that shorten collection
• Pricing service work: fixed, hourly or monthly how pricing must be reflected in the contract
• Building a house or hiring a contractor and the work is not finished construction contract disputes from the employer's side
• MSA and SLA service scope and change terms for monthly work

Before accepting a job, calculate the profit after rework, penalties and money tied up waiting to be collected, then write the scope, revision rounds and variation order into the contract. A job with a good price but a floating scope is usually not worth it.

We help SMEs draft and review work contracts, scopes of work, variation orders and payment terms. For an initial consultation, call +66 92 254 2045 or send us the details. See also contracts and documents and legal retainer.

This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.