A three-month cash flow forecast for a job
In April, the owner of an electrical contractor orders $58,000 of transformers and panelboards for a cold storage building, payable 30 days after delivery in May. The job is profitable on paper. She does not know whether it can carry June's payroll and supplier bills before May's billing is paid.
Lay out, month by month, the cash the job will receive and must pay: each billing on the date it will really be paid, less holdback, and each payroll, supplier, rental and subcontract payment on its due date. The running total shows whether the job carries itself or needs company cash, how much and when. A cost forecast says what the job will cost; this says when the money moves. Profitable jobs still run short, because wages and suppliers are paid weeks before the billing that covers them.
- Start from the billings you expect for the next three months, from the schedule, not from hope.
- Put each receipt on the date you will really be paid. The contract and any prompt payment law set the latest date; this customer's record gives the likely one. Deduct holdback.
- Put each payment on its due date: payroll on paydays, suppliers on their terms, subcontractors as their contracts and the law require.
- Add the lumps: large equipment, deposits, insurance premiums, holdback releases in or out.
- Run the total by month, and by week around a tight payday. Its lowest point is the cash the job needs from the company.
- Act on each gap early: bill complete and on time, get changes approved, time large purchases and arrange credit.
Common mistakes
- Putting receipts on the contract's date when this customer always pays later.
- Counting holdback as cash received.
- Using monthly totals when a payday falls before the receipt in the same month.
- Waiting for the gap to arrive before calling the bank.
Action list
Build the forecast this week
- Three months of billings, from the schedule
- Receipts on the dates this customer pays, less holdback
- Payments and large purchases on their due dates
- The lowest running total and its date
- One action per gap
- An update with every billing
Check your understanding
Your forecast ends the three months $26,000 ahead but shows the job $32,000 short in June. Which number decides what you do this week?
