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Cash flow and forecasting

Forecast money in and out month by month and see in which month the project needs funding.

Start the course How it runs
Cashflow forecast chart and table for the Ashbrook project
Forecast cash flow Cashflow forecast chart and table for the Ashbrook project
Output
Monthly cash flow forecast and cost-value report
Module
Cost control, EVM and risk
Documents
  • Cash flow forecast
  • S-curve
Standards and references
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What it is

Cash flow forecasting predicts when money will come in from the client and go out to subcontractors, suppliers and staff, month by month, until final account. It is built from the programme, the priced bill or cost plan, payment terms in each contract and retention rules. A contractor can be profitable on paper and still fail because valuations are certified late or retention is held for years.

The forecast is refreshed every month against actuals. The project team compares certified value with cost incurred, explains variances, and moves future income and expenditure to reflect the current programme. The result feeds board reporting, bank facilities and decisions such as whether to accelerate, chase overdue payments or renegotiate supply chain terms.

Who does it

Commercial manager / QS
Owns the forecast, the monthly valuation and the cost-value reconciliation.
Project manager
Confirms programme progress and upcoming work that drives the timing of costs and income.
Planner
Provides the updated programme and resource-loaded activities behind the S-curve.
Finance team
Records actual payments and receipts and consolidates project forecasts at company level.
Client's cost consultant
Assesses applications for payment and issues the valuation that determines income.

How it runs

  1. Set the baseline

    Spread the contract sum and the cost budget over the baseline programme to produce income and expenditure S-curves.

  2. Apply payment terms

    Shift each line by its payment cycle: client certification and payment periods, subcontract terms, retention percentage and release dates.

  3. Record the month's actuals

    Enter the certified valuation, invoices received, payments made and accruals for work done but not yet invoiced.

  4. Reconcile cost and value

    Compare value earned with cost to date and explain margin movement by package, including variations and claims not yet agreed.

  5. Reforecast

    Re-spread the remaining value and cost against the current programme and expected final account.

  6. Report and act

    Issue the monthly report with cumulative and net cash position and agree actions such as chasing late payments or revising subcontract cash flow.

How it differs by country

United Kingdom
The Housing Grants, Construction and Regeneration Act 1996, as amended in 2009, gives a right to interim payments, payment and pay less notices and adjudication. JCT and NEC4 contracts set assessment dates and payment periods that must be built into the forecast.
Germany
VOB/B §16 governs Abschlagszahlungen (interim payments) and the Schlussrechnung (final account). Security for performance and defects is commonly held as a Sicherheitseinbehalt or replaced by a bank guarantee.
France
Public works contracts under CCAG-Travaux use monthly acomptes, and the retenue de garantie is capped at 5% and can be replaced by a guarantee. Statutory payment periods in public procurement must be reflected in the income curve.
United States
AIA A201 and the G702/G703 forms are widely used for monthly applications for payment with a schedule of values. Retainage is common, and its rate and release are set by contract and, for public work, by state law.
International
Under FIDIC 2017 the Contractor submits a Statement each month, the Engineer issues an Interim Payment Certificate, and retention is released in stages. Advance payments and their repayment schedule have a large effect on early cash flow.

Common mistakes

  • Using the contract sum S-curve as the cash forecast without applying payment periods and retention.
  • Forecasting income from applied rather than certified or realistically expected values.
  • Ignoring unagreed variations and claims, or including them at full value.
  • Not updating the forecast when the programme slips, so cost and income stay in the wrong months.
  • Leaving out accruals, so cost to date looks low and margin looks better than it is.
  • Forgetting retention release dates and defects period obligations at the end of the project.

In OpenConstructionERP

Module: Cost control, EVM and risk

Cash flow and forecasting uses the Cost control, EVM and risk modules. Cost-Value Reconciliation & Cashflow runs the monthly reconciliation of cost against value earned and holds the cashflow forecast. 5D Cost Model provides S-curves, cash flow projection and budget tracking from the baseline. Finance records invoicing, payments and budgets, so actuals feed the forecast. Full EVM adds forecasting and TCPI analysis, and Project Controls gives an executive view of cost, schedule and change for monthly reporting.

Cost-Value Reconciliation & Cashflow · 5D Cost Model · Finance · Full EVM · Project Controls

The app runs at openconstructionacademy.com/app for course learners.

Cashflow forecast chart and table for the Ashbrook project
Forecast cash flow Cashflow forecast chart and table for the Ashbrook project

Free videos

There is no free video on this process yet.

Courses

Checklists

Short checklists that go with this process.

Practise it in OpenConstructionERP

The free videos explain the process. The full course lets you run it yourself in the ERP, task by task.

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