مدونة

Forecast monthly application values, apply payment terms to determine when income arrives, deduct retention, forecast subcontractor and supplier payment timing, add labour and overhead outgoings. Net cash position = opening balance + income timing – expenditure timing.

Payment terms create a 30-60 day lag between work completion and payment receipt. Retention withholds 5% of income. Front-loaded costs (mobilisation, plant) precede first income. Subcontractor payment cycles may not align with client income. Result: profitable projects can still cause cash crises.

Construction expenditure follows an S-curve: slow start (mobilisation), rapid acceleration (peak activity), then tapering off (completion). Income follows the same shape but lagged by the payment period. The gap between the two curves represents your cash funding requirement.

Retention typically withholds 5% of each valuation, reducing to 2.5% at practical completion, with final release after the defects liability period (usually 12 months). This creates a permanent cash drag – income you’ve earned but can’t access for months or years.

Profitability tells you whether the project will make money overall. Cash flow tells you whether you’ll have money in the bank at each point. A project can be profitable but cash-negative for months – and a cash-positive project can still be losing money (front-loaded applications masking cost overruns).