How Interim Payments Help Contractors Manage Cash Flow
Interim payments provide contractors with regular income, allowing them to cover costs like labour, materials, and overhead as the project progresses. This ensures that the project can move forward without financial strain, while also providing the Client with reassurance that payment is linked to tangible progress.Best Practices for Managing Interim Payments
Contractors should establish clear milestones and payment schedules upfront with the client, tying payments to specific project achievements. Regular invoicing at agreed intervals helps ensure that cash flow remains steady. It’s important to document the progress for each phase to justify the release of funds.Interim payment example under a JCT contract
A contractor on a £900,000 JCT building contract has its third monthly valuation agreed at £300,000 for work done and materials on site. The contract holds 3% retention, so £9,000 is kept back, and £180,000 was paid after the first two valuations. The interim payment due this month is £300,000 less £9,000 less £180,000, which is £111,000. The client's payment notice has to go out within 5 days of the due date, and the final date for payment is 14 days after the due date. If the client wants to pay less than the notified sum, it must serve a pay less notice no later than 5 days before the final date for payment. Without one, the full £111,000 is owed by that date.Interim payment software
Once a contractor runs more than a few valuations a month, tracking applications, retention and payment dates in a spreadsheet gets error-prone. Planyard, our product, keeps contract sums, variations, retention and application amounts together for each project and Subcontract. See JCT Payment Application software for how it fits the JCT cycle.Related Terms: Progress Payment, Valuation