Profitability and the 13-week cash forecast
You will be able to: Read the project profitability report; Build a 13-week cash forecast from derived and typed events; Separate overdue receivables from retention not yet due.
- Read not done yet
- Self-check: not taken not done yet
- Lesson complete not done yet
The Project Profitability report puts every project side by side: contract value, budget, committed, actual cost, forecast cost, forecast margin and billing. Forecast cost is actual plus committed plus the estimate to complete of the work not yet ordered. Forecast margin is the contract value less that forecast, and Margin % shows it as a share of the contract value. Billed is net of VAT, and Billed less Cost shows whether the project is funding itself.
| Check | Green | Amber | Red |
|---|---|---|---|
| Margin (forecast) | 8% and above | 3% to below 8% | Below 3% |
| Cash (net billed / cost) | 1.0 and above | 0.8 to below 1.0 | Below 0.8 |
In lesson 2 the project billed 330,000 net against cost 360,000, a ratio of 0.92: the project is spending more than it has billed, a warning even though the margin is healthy.
The 13-week forecast
The cash forecast starts from the bank balance. The system derives expected events: bills and certificates not yet collected, retention to release, and subcontract and supplier bills still to pay. You add the events only you know: payroll, rent, VAT, tax, cheques and loans. Calculate 13 weeks and the first week with a negative closing balance is marked Shortfall.
| Week | Receipts | Payments | Closing balance |
|---|---|---|---|
| Opening | 120,000 | ||
| 1 | 40,000 | 90,000 | 70,000 |
| 2 | 50,000 | 110,000 | 10,000 |
| 3 | 30,000 | 85,000 | -45,000 |
| 4 | 180,000 | 60,000 | 75,000 |
Week 3 closes at -45,000, the shortfall. The fix is a decision made weeks earlier: chase a certificate, delay a supplier payment, or draw on a facility before payroll.
Receivables and retention
The Finance Hub receivables tab shows progress bills issued and not yet collected, aged by due date, which is the invoice date plus the contract payment terms. The retention tab shows the retention held by the client and the retention you hold from subcontractors, with the practical completion and defects period dates that decide the releases. Read both: a clean ageing can sit beside a large retention that will not be released for a year.
Compare the forecast with what actually happened each week. The aim of the forecast is not to be right to the dirham but to show early where cash will run short, so that there is time to speed up billing, agree payment terms or phase purchases.
Walk it through
- Build a four-week cash table for a project of your own.
- State which green, amber or red band your project's margin falls in.
- In the demo, open the Finance Hub and find the cash forecast tab.
Public demo company, sign in as admin / demoAdmin123. Data refreshes nightly.
- Profitability = contract value less forecast cost; billed net less cost shows funding.
- The 13-week forecast marks the first negative closing week.
- Read receivables and retention separately.
Check yourself
4 questions on this lesson. Not timed, not the exam, and you can try again. Score 60% or more, and read the lesson, to complete it.