Definition
Cash flow forecasting estimates future cash inflows (receipts from billings, retention release, other) and outflows (payroll, subs, materials, equipment, overhead, debt) by period (e.g., weekly or monthly). The result is projected cash balance and timing of surpluses or shortfalls so you can plan financing or investments.
Why It Matters
Construction is lumpy: you spend before you bill, and you wait for payments. Without forecasting, contractors hit cash crunches. A simple forecast based on backlog, billing cycle, and payables helps avoid overdrafts and supports lines of credit and bonding. It is especially important for growth and for jobs with long payment terms.
Field Example
Next 3 months: expect to bill $80K, $90K, $70K; typical collection lag 45 days so receipts lag. Payroll $45K/month; subs and materials follow job schedule. Month 2 shows a $20K shortfall; the contractor arranges a line draw or delays a noncritical payment. Forecast updated as actuals and schedule change.
Calculation / Formula (if applicable)
Projected cash = Opening balance + Projected receipts − Projected disbursements (by period). Receipts from billing schedule and assumed collection lag; disbursements from payroll, AP, and job cost timing. Roll forward; adjust for actuals each period.
Software Application
Support entering or importing projected receipts (by job or in total) and disbursements by period. Apply collection lag and payment timing assumptions. Calculate projected cash balance by period. Compare to actuals and revise. Report forecast vs. actual. Optional: tie receipts to backlog and billing schedule.
Tooltip Version
Cash flow forecasting estimates when money will come in and go out so you can see shortfalls in advance and plan financing or spending.
Related Objects
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