Why construction cash is different
A shop sells something and gets paid. A contractor pays wages on Friday, materials on 30-day terms, subcontractors on their own application cycle, and gets paid when the client's QS certifies the valuation, on a date the client controls, for an amount the client controls. In between, you're the bank.
Most owners manage this on two instruments: the bank balance and their gut. The bank balance doesn't know what's coming. The gut was calibrated when the business was a fifth of the size. So one week a quarter turns into a scramble: a supplier on stop, payroll on the overdraft, a call to the bank. It looks like bad luck. It was visible two months earlier to anyone who'd built the forecast.
Why thirteen weeks
Long enough to see the next quarter's low point. Short enough that the inputs are real rather than hopeful. A twelve-month forecast is a budget; a four-week forecast is a bank statement. Thirteen weeks is the operating horizon.
How to build it
- Opening balance. Today's cleared bank balance across all accounts.
- Receipts, by week. For each live contract, the certified applications on their contractual payment date: application date plus certification period plus payment terms. Not the date you applied. Retention releases only where genuinely due in the window. VAT repayments if you're in repayment. Nothing you're hoping for.
- Payments, by week. Wages on the day they go. Subcontractors on their payment run. Materials on terms from the open purchase orders. PAYE and CIS on the 22nd. VAT on the 7th after the quarter. HP and loans. Rent. Insurance renewals. Everything regular from the last three months of bank statements.
- Closing balance each week. Circle the lowest.
- One scenario. Your largest receipt arrives 30 days late. It will, one day. Recalculate. If the low point goes below zero, that's the conversation to have with the bank now.
What it looks like
| Week | Opening | Receipts | Payments | Closing | Note |
|---|---|---|---|---|---|
| 1 | £142,800 | £0 | £38,200 | £104,600 | Wages, subbies |
| 2 | £104,600 | £118,000 | £61,400 | £161,200 | Riverside cert 14 |
| 3 | £161,200 | £0 | £74,900 | £86,300 | PAYE/CIS 22nd, materials |
| 4 | £86,300 | £0 | £30,300 | £56,000 | Low point |
| 5 | £56,000 | £96,500 | £38,200 | £114,300 | Ashford cert 9 |
The low point is week four, at £56,000, caused by the gap between the Riverside certificate and the Ashford one. If Ashford pays 30 days late, week four becomes £11,000 and week five goes negative. That's the number the bank needs to hear in week one, not week four.
What to do with the low point
- If it's comfortable: nothing. You now know.
- If it's tight: pull a receipt forward (ask the QS about certifying on time, invoice a due retention, apply fortnightly on the biggest job), or push a payment back (negotiate materials terms, time a plant purchase after the low week).
- If it goes negative in the downside case: talk to the bank now about a temporary facility, with the forecast in hand. Banks lend to businesses that can show them the week; they don't lend on a Friday to businesses that can't.
Forecasting a tender before you win it
Before committing to a large contract, model its cash profile on its own: mobilisation costs, the labour and materials you'll fund before the first certificate, retention held, stage payments. Add it to the 13-week forecast. Sometimes the answer is that you can't afford to win the job on those payment terms, and that's far better known before you've priced it.
The monthly rhythm
First working day of the month: roll the forecast forward a month, refresh receipts from the job register and the retentions ledger, refresh payments from the bank. Under an hour once it's built. It's the first page of the monthly working document and the one you read before anything else.
Sources
Questions people ask
What's the difference between a cash flow forecast and a budget?
A budget is annual and shows profit by month. A cash forecast is weekly and shows the bank balance. Profitable businesses run out of cash; the forecast is what stops it.
Should I include retentions in the forecast?
Only those genuinely due for release within the thirteen weeks, and only once you've confirmed with the client that the defects list is clear. Everything else stays out until it's due.
Receipts on the application date or the certified date?
Neither. On the contractual payment date: application, plus the certification period in the contract, plus payment terms. That's when the cash actually lands.
How often should the forecast be updated?
Monthly at minimum, on the first working day. Weekly if cash is tight or the business is growing fast.
About the author. Chris Neuman is the founder of Taxtful, accountants and advisers to UK construction companies turning over £1m to £15m. Taxtful is construction-only: every client, every template, every conversation. This article is general guidance, not advice on your circumstances; rates and rules change, so check the current position before acting.