Profitable on paper and short of cash in the bank is the normal condition of a construction business.
The money goes out weeks before it comes in. Materials go on order and labour gets paid weekly. An application for payment goes in, gets certified late, and then sits on thirty to sixty day terms. Retention is held back for months, sometimes years. CIS comes off the top of whatever does arrive.
Your profit and loss account shows none of that. It tells you the job made money. It does not tell you that you will be short in week six because two valuations slipped and the VAT is due.
A forecast built around the way construction actually gets paid does tell you.
Why a standard cash flow forecast fails here
Most templates assume you raise an invoice and get paid on terms. That is not how your money arrives.
Stage payments and applications. Cash lands when a valuation is certified, not when you decide to invoice. A forecast that ignores certification dates is out by weeks before you have started.
Retention. Held on almost every contract, released in stages, and easy to lose track of completely. We regularly meet firms carrying six figures of retention who cannot say who holds it or when it falls due.
CIS. Deductions come off your income, so the forecast needs the net figure arriving and the set off appearing against your PAYE bill at the right point.
The reverse charge. VAT you once held for a quarter no longer arrives at all on much of your work, so the cushion it used to give you has gone.
Fixed outgoings. Corporation tax, VAT quarters, PAYE and CIS payments all land on dates that have nothing to do with when your customers pay you.
What is included
- A rolling forecast, extended each month rather than rebuilt once a year and forgotten
- Income modelled on actual contract stage payments and certification dates, contract by contract
- Retention as its own line, so you know what is held, who holds it, and when each tranche is due for release
- Labour, materials, plant and subcontractor costs phased to when they are actually paid rather than when they are incurred
- VAT, corporation tax, PAYE and CIS payment dates built into the model
- Scenario work, so you can see what winning a large contract does to your bank balance as well as what losing one does
- A monthly review with us, comparing what happened against what the forecast said, and adjusting from there
How it works
- First call. We go through your live contracts, your payment terms, your retention position and your cost base.
- We build the first forecast. Weekly detail in the near term, monthly further out.
- We show you the pinch points, and what causes each one.
- You get a short list of things that would move the worst of them. Usually payment terms, application timing, or the order you take work in.
- Each month we update it with what actually happened and reforecast from there.
- When something big changes, a large win or a customer going quiet, we re-run it that week rather than waiting.
Who this is for
UK construction limited companies turning over between £500,000 and £5 million, working on contracts with stage payments and retention. It works best where you are growing, because growth is what empties the bank account.
It is not for you if you want a forecast produced once for a lender and never opened again. We will build that, but it is not this. It also will not help much if nobody in the business knows what each job is costing, because a forecast built on guessed costs forecasts guesses. Job costing comes first in that case.
Common questions
How far ahead does it look?
Weekly in the near term, monthly beyond that. The weekly view is where the decisions get made.
Do we need cloud accounting for this?
It works far better with it. Reforecasting every month from exported spreadsheets is a job nobody keeps up for long.
Our contracts are all different lengths and values. Does that matter?
No. That is the normal position and the reason the forecast is built contract by contract instead of from a monthly average.
Can it tell us whether we can afford to take on a bigger job?
That is the main thing it gets used for. A contract you can deliver and cannot fund is worse than one you turn down.
Will you produce something a bank or funder will accept?
Yes. We will not put figures in it that we do not believe, because you are the one who has to defend them in the meeting.
Book a call. Bring your current contract list and your retention position, and we will show you where the next squeeze is coming from.
Common questions
What makes a construction cash flow forecast different?
Retentions, applications and payment terms. Money you have earned sits with someone else for months, and a forecast that ignores that tells you nothing useful. We build the forecast around when cash actually lands, including the retention releases and the VAT and CIS positions, rather than around the profit and loss.
How often does the forecast get updated?
Monthly, and rolled forward as the numbers come in. A forecast built once and left alone is worse than none, because you make decisions on it after it has stopped being true.