How is a cashflow forecast built from a programme?

A cashflow forecast is the programme translated into money and time. Start with the programme, because it tells you when each activity happens, and spread the cost of the works across it: labour, plant, materials and subcontract cost falling in the weeks the activities run, which produces the S-curve of cumulative cost rising slowly at first, steeply through the middle and levelling at the end. That curve is money going out. Then build the money coming in, where the payment terms do the work: value earned each period becomes an application on its date, the certificate follows, the payment period runs, and only then does cash arrive, less the retention the contract deducts. So the receipts curve is the value curve shifted right by the whole length of the payment machinery and shaved by retention. The forecast is the two curves together, and the distance between them at any point is the working capital the job requires you to find. Done properly it is built before works start, off the tender programme and the contract's payment clauses, so the tight periods are visible before a spade is in the ground, then maintained monthly against actual progress and certification, because programmes slip and certifiers cut and both move the curves. The output is not a number but a shape: where the job is most exposed, how deep the dip goes and when it recovers, exactly what you need to arrange funding calmly rather than in a crisis.

Take a roofing subcontractor pricing a job with a front-loaded programme, a lot of material bought early, then a long tail of fixing labour. Built before starting, the forecast shows a steep early spend, and the receipts curve, pushed right by a monthly application plus a six-week payment period and shaved by retention, shows the first real money arriving in week ten. Laid over each other, the two curves reveal a working-capital hole in weeks six to nine far larger than the firm assumed, because the big material buy is paid for long before the first certificate pays for any of it. Forewarned, the subcontractor negotiates a stage payment on materials into the order and lines up a short facility for the gap. As the job runs, the forecast is updated monthly: when fixing slips two weeks, the receipts curve slips with it and the dip deepens slightly, but again is seen a month ahead. The forecast did not change the job; it turned a hidden funding crisis into a scheduled, arranged one.