Construction Cash Flow: A Worked Example of When Money Is Needed

Construction spending is not evenly distributed. A month-by-month example showing where the peak sits and why it matters.

Owners typically plan construction finance as a total and assume it will be drawn evenly. Construction does not spend evenly: it accelerates through the structural phase, peaks during finishing procurement, and leaves a tail that people forget to fund.

The situation

An owner has a construction budget of SAR 1,000,000 over a twelve month programme, funded partly from savings and partly from a facility. They want to know when the money is actually needed.

Assumptions (illustrative)

• Total construction budget: SAR 1,000,000.
• Programme: 12 months.
• Assumed mobilisation advance: 10 per cent.
• Assumed structural phase: months 2 to 5, approximately 35 per cent of cost.
• Assumed envelope and services: months 5 to 8, approximately 25 per cent.
• Assumed finishing: months 8 to 12, approximately 25 per cent.
• Retention withheld: 5 per cent, released after handover.

Step 1: Mobilisation

10 per cent of SAR 1,000,000 equals SAR 100,000 in month 1.

Significant money leaves before anything visible exists, which is the first surprise for owners funding from savings.

Step 2: Structural phase

35 per cent equals SAR 350,000 across months 2 to 5, roughly SAR 87,500 per month.

This is the first sustained drawdown, and it is relatively predictable because quantities are known from the drawings.

Step 3: Envelope and services

25 per cent equals SAR 250,000 across months 5 to 8, roughly SAR 83,000 per month.

Spending continues at a similar rate while the building looks much the same from outside, which affects how progress feels against money spent.

Step 4: Finishing and procurement peak

25 per cent equals SAR 250,000 across months 8 to 12, but material orders are placed earlier, pulling part of it into months 6 and 7.

This is the real peak. Long lead items must be ordered while structural payments are still running, so two phases overlap in cash terms even though they do not overlap on site.

Step 5: Retention and the tail

5 per cent equals SAR 50,000 retained, released after handover and the defects period.

Budget for it, but do not count on paying it early. It is the contractor's incentive to return, and its release date belongs in your plan.

Step 6: Peak funding requirement

Cumulative spend by the end of month 7 is roughly SAR 620,000, with the largest single-month requirement falling where procurement overlaps construction.

The funding plan must serve the peak month, not the average. A budget that balances over twelve months can still stop a site in month seven.

What changes the answer

• Advance payments for imported materials pull cash forward substantially and can shift the peak by a month or two.
• Delay extends the programme and the site overheads, spreading spend but increasing the total.
• Variations add cost in the phase in which they arise, most often during finishing when decisions crystallise.
• If funding is staged from a facility, drawdown conditions and timing must be checked against this profile rather than assumed to be instant.

What the numbers tell you

• Plan the peak month, not the monthly average.
• Expect procurement to pull cash forward before the related work appears on site.
• Keep retention in the plan as a deferred obligation rather than a saving.
• Align any financing drawdown schedule with the construction payment schedule before signing either.

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.

If you are preparing to build, Domira can review your drawings, scope and contractor offers before you commit, and supervise delivery against the programme and specification you agreed.