Cash flow for small builders and developers

Profitable projects still fail when cash runs out before payments arrive. A cash flow forecast shows when money leaves and when it comes in, so gaps can be funded before they appear.

Money in, money out

List expected receipts and payments by date, not by total. Receipts include progress payments, loan draws and sales. Payments include materials, wages, subcontractors, fees and taxes. The running balance shows where you fall short.

Typical timing gaps

• Supplier deposits before draws or progress payments.
• Payment terms: you pay suppliers faster than you are paid.
• Retention held on your invoices.
• Approval delays on draws or certificates.
• Tax and duty payments due on arrival of goods.

Close the gaps

Options include negotiating payment terms, staging orders, adjusting the schedule, arranging a working capital line in advance, or using a larger deposit. Raise any gap with your lender or adviser early, as options narrow when cash is already short.

Forecast with the tool

The budget tool below totals your own lines for one period. Use one copy per month, or per phase, to build a picture of timing. It does not suggest amounts.

Quick answers

• Why does a profitable project run out of cash? Costs often come before income: deposits, materials and wages precede progress payments or sales.
• How far ahead should I forecast? Week by week for the next two to three months, and month by month beyond that, updated often.
• What is retention? A portion of a payment held back until completion or the end of a defects period, according to the contract. Check your contract.

This guide is general information. Confirm structural, legal, financial and permitting questions with qualified professionals and the local authority, and use written quotes for any commitment.

Questions people ask

Why does a profitable project run out of cash?

Costs often come before income: deposits, materials and wages precede progress payments or sales.

How far ahead should I forecast?

Week by week for the next two to three months, and month by month beyond that, updated often.

What is retention?

A portion of a payment held back until completion or the end of a defects period, according to the contract. Check your contract.

Sources and further reading

• Project Management Institute
• Consumer Financial Protection Bureau
• FDIC

Text Digital Oro

Digital Oro International advertises on The Company Chronicle. This guide was written by our editorial team from public sources and general professional practice; it does not describe a guarantee, quote or offer from Digital Oro International. Confirm current terms, prices and availability with the operator before you decide.