Forecast construction project cash gaps

Direct answer

Start with available cash. Add expected receipts from each project and subtract dated payroll, supplier, subcontractor, and company payments. Show retainage at its expected release date, keep pending change orders separate, and identify the lowest projected cash week.

Why this question comes up

Payroll and materials can come due before a pay application is certified and collected. Overlapping jobs can deepen the gap even when each is expected to earn a profit.

Records to gather

• Available cash and upcoming company-level payments
• Pay applications and schedule of values, including submission and approval status
• Retainage amounts and release conditions
• Subcontractor and supplier payment terms
• Change orders — approved, pending, and disputed
• Payroll and equipment costs by project and week
• Actual dates from application, certification, and invoice to cash received

Review workflow

1. Build the dated cash view. Start with available cash. Enter each project’s expected receipts and payments, plus company overhead, by week. Reconcile the first week to actual bank and payable records.
2. Check collection dates. Use the pay-application status, contract terms, and observed lag from submission or certification to receipt. Show a later-payment case where the date is uncertain.
3. Show retainage separately. Use the amount and release conditions in each contract; do not treat retained amounts as cash due with the current application.
4. Separate change-order cases. Include known costs. Show unapproved recovery in a separate scenario until approval and billing rights are clear.
5. Combine projects. Add all job forecasts and company obligations to find the lowest cash week and the lead time for a response. Extend the forecast past the relevant billing cycle and decision deadline.

What a useful answer should include

• Weekly net cash movement by project and company-wide ending cash
• Retainage held, by project, with expected release timing
• Pending change orders separated from approved
• Subcontractor payment timing against expected collection
• The lowest projected position and the week it occurs
• Collection assumptions based on application status, contract terms, and actual payment history

Common failure modes

• Assuming the due date is the receipt date. Test the forecast against past application-to-cash timing.
• Omitting retainage. Use its contract-specific release condition and expected date.
• Counting an unapproved change as a certain receipt. Keep its cost in the base case and potential recovery in a separate scenario.
• Leaving out company payments. Job-level cash forecasts alone cannot show the company’s lowest cash balance.