Construction cash flow forecasting, with a free 13-week template

A job can make money and still leave you short in the bank, because wages and suppliers are paid weeks before the client pays you. A 13-week look-ahead shows the gap before you reach it, while you can still chase a payment, move a supplier run or talk to the bank.

What is cash flow in construction?

Cash flow in construction is the timing of money in and out of your bank: applications and valuations paid by clients coming in, and wages, subcontractors, suppliers, plant and tax going out. Contractors are generally paid in arrears, so money for this month's work often arrives weeks after you've paid for it.

Profit and cash answer different questions. Profit tells you whether a job makes money by the end. Cash flow tells you whether you can pay everyone on Friday.

Why do construction firms run short of cash?

Mostly because of timing. You pay your own people every week and your suppliers every month, while each application waits for a valuation, a payment notice and the final date for payment. Retention holds back part of every payment until completion and beyond, and a pay less notice can cut what arrives.

1. 1

   You're paid in arrears

   You pay for labour, materials and plant first, and the client pays for that work later. Until each application is paid, your business is funding the job.

   Source: RICS, Commercial management of construction

2. 2

   Payment terms stretch the wait

   Each payment has a due date and a final date for payment. Where a contract sets neither, the Scheme's defaults put the final date 24 days after the valuation period ends.

   Source: Scheme for Construction Contracts, Part II

3. 3

   Retention holds money back

   The government's 2017 consultation described retention as typically 5% of each payment, with half released at completion and half after a defects period of usually 12 to 24 months.

   Source: GOV.UK, Retention payments in the construction industry (2017)

4. 4

   Valuations come in lower

   If the payer gives a valid pay less notice in time, it only has to pay the sum in that notice. Track the dates on every application so you know what to expect, and when.

   Source: Construction Act, section 111

Retention may change. The Commercial Payments Bill, which was before Parliament on 4 October 2026, would ban retention deductions in construction contracts, and the government says it will consult on when that starts. Until a change is law and in force, the retention terms in your contract still apply.

What does the Construction Act say about getting paid?

The Housing Grants, Construction and Regeneration Act 1996 gives you the right to stage payments on jobs of 45 days or more, a due date and final date for each payment, and a notice of what will be paid. Pay-when-paid clauses don't work, and you can suspend work or go to adjudication if you're not paid.

These rules apply in England, Wales and Scotland. They don't cover work for a homeowner on the home they live in. If a business customer pays late, you can usually claim interest at 8% above the Bank of England base rate, unless your contract sets its own rate.

How do you prepare a construction cash flow forecast?

Start with today's bank balance, then list every payment you expect in and out over the next 13 weeks, in the week the money actually moves. Work out when each application will really be paid from its contract terms, add up each week, and look for the weeks where the balance drops below the level you're comfortable with.

Some people call it a cash flow projection. It's the same thing, and it takes seven steps:

1. 1

   Start from today's bank balance.

   Use the real figure, not the one in last month's accounts.

2. 2

   List what you've applied for, and when each will be paid.

   Work from each contract's due date and final date, less retention and anything likely to be cut.

3. 3

   Add the weekly costs.

   Wages, plant hire and anything else that goes out every week.

4. 4

   Add the monthly and quarterly ones.

   Subcontractors, suppliers, salaries, PAYE and CIS, VAT, rent and loan repayments, each in the week it leaves the bank.

5. 5

   Set the lowest balance you want to keep.

   Then look for the weeks that drop below it.

6. 6

   Deal with a tight week now.

   Chase an overdue application, move a supplier run or talk to the bank before the week arrives.

7. 7

   Update it every Monday.

   Roll it on a week and compare what happened with what you expected.

A free 13-week cash flow template

The Excel look-ahead follows those steps and does the sums. Put each application on the Receipts tab and it works out the week the money should arrive. It then adds up every week and flags any that fall below your minimum. There's a PDF to fill in by hand as well.

The sheet has a line for each of these, so nothing regular gets missed:

What is CVR in construction?

CVR, or cost value reconciliation, compares the value of the work you've done on a job with what it has cost you, both taken to the same date, usually month-end. RICS calls it the project's profit and loss statement. In its simplest form, it tells you whether a contract is making or losing money right now.

A job can show a healthy margin in the CVR and still drain your cash, because the CVR counts work done, while the bank only sees money paid. Run both and you see the whole picture.

Where can AI help with cash flow?

AI is useful for the gathering and checking, which is where most of the time goes. It can pull figures from your accounts, valuations and payment notices into the look-ahead, point out what changed since last week, and draft the chase for an overdue payment. Decisions about who gets paid, and when, stay with you.

Before you connect AI to your accounts, read using AI with the systems you already run, and agree what can go in with the AI policy template.