Construction Cash Flow Forecast: EVM-Enhanced Projection Guide

<div class="ge-article-wrapper"><article class="ge-article-body"><p>A cash flow forecast predicts when money flows in and out of a project. On NEC4 contracts, it drives everything from working capital planning to pain/gain share timing. For <a href="/en/earned-value">earned value management</a>, the cash flow forecast is where EVM metrics meet commercial reality.</p><p>This term is part of the <a href="/en/earned-value/definitions">earned value definitions glossary</a>.</p><h2>How EVM Improves Cash Flow Forecasting</h2><pre class="ge-ascii-diagram ge-anim">TRADITIONAL vs EVM-ENHANCED CASH FLOW Traditional: Month 1 2 3 4 5 6 7 8 9 10 Spend £1.2 1.4 1.8 2.1 2.3 2.5 2.3 2.0 1.5 0.9 Income £0.9 1.1 1.5 1.8 2.0 2.2 2.1 1.8 1.3 0.8 (Based on programme and payment terms) EVM-Enhanced (using CPI = 0.92 from month 6): Month 7 8 9 10 Spend £2.5 2.2 1.6 1.0 (adjusted for CPI) Income £2.1 1.8 1.3 0.8 (based on EV not AC) EVM tells you ACTUAL spending efficiency, not assumed.</pre><h2>Cash Flow on NEC4 Option C</h2><p>On Option C, payment is based on Defined Cost plus Fee. The cash flow forecast must account for: actual cost recovery (monthly), fee calculation, pain/gain share at completion, and retention mechanisms.</p><h2>Worked Example</h2><span class="ge-worked-label">Worked Example</span><div class="ge-callout ge-anim"><p><strong>Scenario:</strong> A £22M NEC4 Option C water treatment project. At month 8, CPI is 0.93 and SPI is 0.88.</p><p>EAC = £22M / 0.93 = £23.66M. The project will cost £1.66M more than target. On a 50/50 pain share, the contractor absorbs £830K.</p><p>Cash flow impact: the contractor is spending faster than earning, creating a negative cash position that grows until the EAC is reached. Monthly cash requirement increases from £1.8M to £1.95M.</p></div><h2>Common Mistakes</h2><ol><li><strong>Not updating forecasts with EVM data.</strong> CPI tells you real spending efficiency.</li><li><strong>Ignoring payment timing.</strong> NEC4 clause 51 allows 3 weeks from assessment to payment.</li><li><strong>Forgetting retention impacts.</strong></li></ol><div class="ge-product-note ge-anim"><p><strong>How Gather helps.</strong> Gather generates EVM-enhanced cash flow forecasts automatically from your site diary data. <a href="https://gatherinsights.com/contact">Book a demo</a>.</p></div><h2>Frequently Asked Questions</h2><h3>How does CPI affect cash flow?</h3><p>A CPI below 1.0 means you're spending more per unit of work than planned. Your cash outflow increases relative to earned value, widening the gap between spend and recovery.</p><h3>Should I use CPI or SPI for cash flow forecasting?</h3><p>CPI for cost forecasting (how much you'll spend). SPI for timing (when you'll spend it). Both together give the most accurate forecast.</p></article></div>