Forecasting cash across the working day cycle

A cash flow forecast is only as good as the payment dates behind it. On a New Zealand contract those dates are driven by the Construction Contracts Act 2002, which counts in working days, not calendar days, and that difference is what separates a forecast that holds from one that misses.

Model the claim, not the calendar

Money follows the payment claim. Serve the claim, the payer has twenty working days to respond with a payment schedule, and the scheduled amount falls due on the due date. To forecast a receipt you work forward from the claim date across the working day count, then land on the day the cash actually arrives.

• Claim date. The day you serve, fixed to the same point each month.
• The working day count. Twenty working days by default, weekends and public holidays stripped out.
• The receipt. The gross figure, GST at fifteen per cent included, on the due date.

The December to January gap

Working days exclude the whole period from the twenty fourth of December to the fifth of January. A payment claim served in the first half of December has a response deadline that jumps across that break and lands well into the new year. The cash that a naive calendar forecast shows arriving in early January will not turn up until later, and a contractor carrying wages through the break needs to know that in advance.

Peak funding and the retention drag

Two things push the funding requirement up. The lag between doing the work and being paid for it, and the retention held back on every claim. Both belong in the forecast. The retention line in particular is money earned that will not arrive until practical completion and the end of the defects period, so it sits out of the cash curve for a long time.

Update it every cycle

A forecast set at tender and never touched is a wish. Each payment claim gives you a real served date and, once the payment schedule comes back, a real scheduled amount. Feed both in, re roll the working day count, and the curve tightens month by month.

The discipline

Build the forecast on served claim dates and the working day count, mark the summer break explicitly, and carry retention as a separate late arriving line. The gap you plan for is survivable. The gap you did not see is what closes a business.