When the Money Leaves: A Worked Example of a Build Cash Flow Curve

Construction spending is not spread evenly across the programme. Knowing the shape of the curve decides how much cash you need and when.

Construction cost accumulates as a shallow start, a steep middle and a long tail. The shape matters because your obligation to pay follows the curve, not the calendar, and financing drawn evenly across a build either sits idle early or runs short in the middle. This example builds the curve for a single building and tests it against two funding patterns.

The situation

An owner abroad is funding a small apartment building from savings plus a facility. The total construction budget is SAR 12,000,000 over a twelve month programme, and the owner wants to know the maximum cash required in any month.

Assumptions (illustrative)

• Construction budget: SAR 12,000,000 over twelve months.
• Substructure and structure, months one to five: 45 per cent of the budget.
• Envelope and services rough in, months five to nine: 30 per cent of the budget.
• Finishes, testing and external works, months nine to twelve: 25 per cent of the budget.
• Retention withheld from each payment: 5 per cent.
• Payment terms: certified monthly, paid the following month.
• These proportions and amounts are illustrative assumptions used to demonstrate the method.

Step 1: Convert phase percentages into monthly amounts

Structure is 45 per cent of SAR 12,000,000, or SAR 5,400,000 over five months, roughly SAR 1,080,000 per month. Envelope is SAR 3,600,000 over four months, SAR 900,000 per month. Finishes are SAR 3,000,000 over three months, SAR 1,000,000 per month.

Even this crude split shows that the heaviest monthly commitment falls in the first phase, not at the end as owners often expect.

Step 2: Deduct retention to find the cash actually paid

At 5 per cent retention, a certified SAR 1,080,000 is paid as SAR 1,026,000, and SAR 54,000 is held.

Retention smooths the curve slightly during the works and creates two lumps later when it is released.

Step 3: Shift payments by the credit period

With certification monthly and payment the following month, month one work is paid in month two, so your cash requirement begins one month after site activity does.

One month of credit is genuine working capital relief, and losing it by agreeing to pay on application changes your funding requirement immediately.

Step 4: Find the peak monthly outflow

The highest monthly payment is roughly SAR 1,026,000 during the structure phase, occurring in months two to six.

Your facility or savings must clear this figure five times in succession, which is a different test from covering the total.

Step 5: Check cumulative cash at the halfway point

By the end of month six, cumulative certified value is about SAR 6,300,000 and paid cash about SAR 5,700,000, so roughly 48 per cent of the cash leaves in the first half.

Half the money goes out before the building looks like anything, which is the single most useful fact to give a funder or a co investor.

Step 6: Add the retention releases

Total retention of about SAR 600,000 is released in two tranches, typically half at completion and half at the end of the defects period.

Two payments fall after the building is finished, which owners frequently forget when planning the first year of operating cash.

What changes the answer

• If the structure phase runs long, the peak month persists rather than rising, which strains a facility with a fixed drawdown schedule.
• If materials on site are payable, the curve steepens early because large orders are paid before they are installed.
• If payment terms move from thirty days to on application, the whole curve shifts a month earlier.
• If variations arrive late in the programme, the tail of the curve thickens exactly when funding is usually tightest.

What the numbers tell you

• Plan for the peak month, not for the total, because the total never arrives at once.
• Protect the credit period between certification and payment, since it is free working capital.
• Remember that roughly half the cash usually leaves before the building is visibly advanced.
• Hold cash for the retention releases, which arrive after the project stops feeling active.

Limits of this example

Every figure above is an illustrative assumption used to show the method, not a quote, valuation or market rate. Costs, rates, fees and regulations change and must be confirmed with the relevant authority, lender or supplier before you commit.

Domira designs, builds and manages projects across Saudi Arabia for owners who are based abroad: land appraisal, feasibility, design, construction, handover and asset management under one accountable contract. Send us the plot or the brief and Domira will put the numbers in front of you before you commit.