Forecasting cash on the certificate cycle

Cash flow forecasting is not a chart of expected turnover. It is a dated ledger of money coming in against money going out, and the value of it is entirely in the accuracy of the dates. On a South African contract those dates are set by the payment mechanism, so the forecast has to be built on it.

Money in follows the certificate

On a JBCC job the cash arrives after the interim payment certificate, at the end of the payment period, counted in calendar days. So the receipt date for each cycle is the valuation date, plus the time to certify, plus the payment period. Forecast the receipt on the day the money is actually free, not on the day the work was done.

• Valuation date. When the work is measured to.
• Certificate. When the principal agent fixes the sum.
• Payment period. The calendar days from certificate to money, around fourteen on JBCC.

Public work adds a second date

On state work the thirty day rule under the PFMA and Treasury Regulation 8.2.3 sits over the invoice. That can push the real receipt date past the contract payment period, so on a public job the prudent forecast uses the later of the two. Forecasting against the contract alone, when the state pays to its own thirty day window, overstates how early the cash arrives.

Money out does not wait

The other side of the ledger runs on its own clock. Wages, subcontractors, plant and materials fall due when they fall due, often before the certificate that covers them has been paid. The gap between paying for the work and being paid for it is the funding requirement, and it is largest early in the job when the contractor is spending ahead of the first meaningful receipt.

The peak is the number that matters

Run the two sides together across the programme and the forecast shows a low point, the moment the contractor is most out of pocket. That figure is the working capital the job actually needs. A contractor that knows its peak funding can arrange for it. A contractor that does not finds out the hard way, in the month it cannot make payroll.

The habit

Rebuild the forecast every certificate, replacing the projected receipt with the certified figure and the real payment date. A forecast that is never updated is a guess that ages. One that is refreshed each cycle turns the payment mechanism into a funding plan you can trust.