Cash Flow Forecasting Procedures

Document Type: Procedure
Version: 1.0
Last Updated: February 2026
Distribute To: CFO, Controller, Project Managers

Purpose

Establish procedures for forecasting cash flow to ensure adequate liquidity for operations, growth, and financial obligations.

Why Cash Flow Forecasting Matters

Construction Cash Flow Reality:

Revenue ≠ Cash (billing cycles, retainage)
Expenses precede revenue (mobilization, materials)
Seasonal fluctuations are common
One slow-paying client can create crisis

Benefits of Forecasting:

Anticipate shortfalls before they occur
Optimize line of credit usage
Time equipment purchases
Negotiate better vendor terms
Sleep better at night

Forecasting Framework

Time Horizons:

Horizon	Purpose	Update Frequency
13-week rolling	Operational planning	Weekly
Quarterly	Strategic planning	Monthly
Annual	Budgeting, banking	Quarterly

13-Week Cash Flow Forecast

The Gold Standard:

================================================================
         13-WEEK CASH FLOW FORECAST
================================================================

Company: _______________________  Prepared: ___________________

================================================================

                    WEEK ENDING
              |  W1  |  W2  |  W3  | ... | W13 |
================================================================

BEGINNING CASH    |      |      |      |     |     |

----------------------------------------------------------------
CASH RECEIPTS:

Project billings collected:
  Project A       |      |      |      |     |     |
  Project B       |      |      |      |     |     |
  Project C       |      |      |      |     |     |
  Other projects  |      |      |      |     |     |

Retainage released|      |      |      |     |     |
Other income      |      |      |      |     |     |

TOTAL RECEIPTS    |      |      |      |     |     |

----------------------------------------------------------------
CASH DISBURSEMENTS:

Payroll (net)     |      |      |      |     |     |
Payroll taxes     |      |      |      |     |     |
Benefits          |      |      |      |     |     |
Subcontractors    |      |      |      |     |     |
Materials/vendors |      |      |      |     |     |
Equipment         |      |      |      |     |     |
Rent/facilities   |      |      |      |     |     |
Insurance         |      |      |      |     |     |
Loan payments     |      |      |      |     |     |
Owner draws       |      |      |      |     |     |
Taxes (income)    |      |      |      |     |     |
Other             |      |      |      |     |     |

TOTAL DISBURSEMENTS|     |      |      |     |     |

----------------------------------------------------------------

NET CASH FLOW     |      |      |      |     |     |

ENDING CASH       |      |      |      |     |     |

----------------------------------------------------------------

LINE OF CREDIT:
Available         |      |      |      |     |     |
Drawn             |      |      |      |     |     |
Net available     |      |      |      |     |     |

TOTAL LIQUIDITY   |      |      |      |     |     |

================================================================

Building the Forecast

Step 1: Project Cash Receipts

For Each Active Project:

Project: _______________________

Billing schedule:
  Next billing date: _______________
  Amount: $_______________________
  
Payment terms: _____ days

Expected collection: _______________

Historical collection pattern:
  Avg days to collect: _____
  Payment reliability: ☐ Excellent  ☐ Good  ☐ Fair  ☐ Poor

Adjustments:
  Disputes/holds: $________________
  Retainage held: $________________

Collection Timing Assumptions:

Client Type	Expected Days	Confidence
Government	45-60	High (predictable)
Institutional	30-45	High
Commercial/Developer	30-45	Medium
Private/residential	15-30	Variable

Step 2: Forecast Disbursements

Fixed/Predictable:

Payroll (by pay period)
Rent/lease payments
Loan payments
Insurance (monthly or quarterly)
Subscriptions

Variable but Forecastable:

Subcontractor payments (based on pay apps)
Material purchases (based on project schedules)
Equipment rentals

Variable/Discretionary:

Equipment purchases
Bonuses
Owner distributions

Step 3: Apply Timing

Receipts Timing:

Invoice Date → Collection Date

Factor in:
- Payment terms
- Client payment history
- Disputes/issues
- Holidays/closures

Disbursement Timing:

Invoice Date → Payment Date

Consider:
- Vendor terms
- Early pay discounts
- Cash position
- Relationship importance

Weekly Update Process

Every Monday:

1. Update Actuals (Prior Week)

Actual cash receipts
Actual disbursements
Ending cash position

2. Roll Forward

Add new Week 13
Update all assumptions

3. Variance Analysis

================================================================
         WEEKLY VARIANCE ANALYSIS
================================================================

Week Ending: ___________________

                        | Forecast | Actual | Variance |
----------------------------------------------------------------
Beginning cash          |          |        |          |
Total receipts          |          |        |          |
Total disbursements     |          |        |          |
Ending cash             |          |        |          |

Significant variances explained:
___________________________________________________________

Forecast adjustments needed:
___________________________________________________________

================================================================

4. Alert Review

Any week showing negative ending cash?
Any week below minimum threshold?
Any assumptions changed?

Alert Thresholds

Cash Position Alerts:

Level	Threshold	Action
Green	> 2 weeks payroll	Normal operations
Yellow	1-2 weeks payroll	Monitor closely
Orange	< 1 week payroll	Activate contingencies
Red	Potential shortfall	Emergency action

When Yellow Alert:

Accelerate collections
Review A/R aging daily
Delay discretionary spending
Consider early pay discounts

When Orange/Red:

Contact slow-paying clients directly
Negotiate extended terms with vendors
Draw on line of credit
Defer non-critical payments
Owner capital call (if needed)

Forecasting by Project Phase

Project Lifecycle Cash Flow:

Mobilization    ───────── Negative (startup costs)
                               ↓
Production      ───────── Variable (billing catches up)
                               ↓
Substantial Comp ───────── Positive (final billings)
                               ↓
Closeout        ───────── Waiting (retainage release)

Cash Flow by Project Type:

Project Type	Cash Pattern	Key Timing
T&M	Positive bias	Bill frequently
Lump Sum	Front-load	Schedule of values
Cost-Plus	Neutral	Bill actual costs
Hard Bid	Watch margins	Change order timing

Retainage Impact

Retainage Tracking:

================================================================
         RETAINAGE SUMMARY
================================================================

Project          | Retainage Held | Expected Release | Amount |
----------------------------------------------------------------
                 |                |                  |        |
                 |                |                  |        |
                 |                |                  |        |
----------------------------------------------------------------
TOTAL            |                |                  |        |

================================================================

Retainage by quarter expected:
Q1: $________________
Q2: $________________
Q3: $________________
Q4: $________________

================================================================

Retainage Reality Check:

Typical release: 30-90 days after substantial completion
May require punch list completion
May require lien waivers from all subs
Some retainage disputes last months

Seasonal Adjustments

Construction Seasonality:

Quarter	Typical Pattern	Cash Impact
Q1 (Winter)	Slowest billing	Collections from Q4
Q2 (Spring)	Ramp up	Payables increase
Q3 (Summer)	Peak activity	High cash flow
Q4 (Fall)	Wind down	Collect retainage

Adjust for Your Market:

Geographic climate factors
Your specific project mix
Historical patterns

Line of Credit Management

Optimal Usage:

================================================================
         LINE OF CREDIT TRACKING
================================================================

Credit Limit:           $________________
Current Balance:        $________________
Available:              $________________

Borrowing Base (if applicable):
  Eligible A/R:         $________________
  Advance rate:         _____%
  Available to draw:    $________________

================================================================

Monthly Usage Pattern:

Month    | Avg Balance | Peak Balance | Days > 50% |
---------|-------------|--------------|------------|
Jan      |             |              |            |
Feb      |             |              |            |
...      |             |              |            |

================================================================

Best Practices:

Don't use as permanent working capital
Draw before you desperately need it
Pay down when possible
Keep some capacity in reserve

Cash Flow Improvement Strategies

Accelerate Receipts:

Strategy	Implementation
Bill immediately	Same day as work complete
Invoice accuracy	Reduce disputes/delays
Early pay incentive	2% 10 net 30 (evaluate cost)
Progress billing	More frequent milestones
Retainage negotiation	Lower % or earlier release
Credit card acceptance	Faster payment (watch fees)

Manage Disbursements:

Strategy	Implementation
Negotiate terms	30-45 day terms standard
Time payments	Pay on due date, not before
Consolidate vendors	Leverage for better terms
Level payables	Avoid month-end spikes
Equipment financing	Preserve cash for operations

Integration with Financial Reporting

Monthly Reconciliation:

Cash Flow Forecast → Actual Results → Financial Statements

Verify:
- Beginning cash matches bank
- Receipts match deposits
- Disbursements match checks/ACH
- Ending cash matches bank

WIP Coordination:

Billing forecast should align with WIP projections
Over/under billings affect cash timing
Cost projections affect payment timing

Software Integration

BLDR Pro:

Project schedules drive billing timing
Material orders drive payment timing
Daily reports inform status

Accounting System:

A/R aging for collection forecast
A/P aging for payment forecast
Bank reconciliation for actuals

Banking Covenant Compliance
Working Capital Management
Accounts Receivable Procedures
Line of Credit Management

Template provided by support.construction. Cash is king in construction—forecast it or suffer the consequences.

Purpose​

Why Cash Flow Forecasting Matters​

Construction Cash Flow Reality:​

Benefits of Forecasting:​

Forecasting Framework​

Time Horizons:​

13-Week Cash Flow Forecast​

The Gold Standard:​

Building the Forecast​

Step 1: Project Cash Receipts​

Step 2: Forecast Disbursements​

Step 3: Apply Timing​

Weekly Update Process​

Every Monday:​

Alert Thresholds​

Cash Position Alerts:​

When Yellow Alert:​

When Orange/Red:​

Forecasting by Project Phase​

Project Lifecycle Cash Flow:​

Cash Flow by Project Type:​

Retainage Impact​

Retainage Tracking:​

Retainage Reality Check:​

Seasonal Adjustments​

Construction Seasonality:​

Adjust for Your Market:​

Line of Credit Management​

Optimal Usage:​

Best Practices:​

Cash Flow Improvement Strategies​

Accelerate Receipts:​

Manage Disbursements:​

Integration with Financial Reporting​

Monthly Reconciliation:​

WIP Coordination:​

Software Integration​

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