Your cash gap is written into the contract.

Your cash gap is written into the contract

Cost & Cash Week 16 made an uncomfortable argument: you can go bust making a profit. The job is earning, the margin's intact, and the bank account still empties, because the money you spend and the money you receive move on different timetables.

That article explained the mechanism from the finance side. This one shows you where the timetable is written, because it isn't a market condition or an unfortunate habit. It's a set of periods in Clause 14, and most of them default to numbers nobody negotiated.

One month's money, step by step

The cycle starts with a statement. You submit it to the Engineer after the end of the payment period stated in the Contract Data, with the supporting documents behind it.

The Engineer then has twenty-eight days from receiving that statement to issue an interim payment certificate to the employer, copied to you. And the employer pays the certified amount within the period the Contract Data sets — and where nobody set one, fifty-six days.

Notice what the fifty-six days runs from. Not the certificate. Not the day the employer's accounts department opens the file. Fifty-six days after the Engineer receives your statement.

The certificate sits inside the payment period

That single detail changes how the cycle behaves, and it is worth being explicit because a lot of people read the two periods as consecutive.

They aren't. The twenty-eight days for certification sit inside the fifty-six for payment. An Engineer who uses the full twenty-eight leaves the employer twenty-eight. An Engineer who certifies in a week leaves the employer forty-nine. Either way the money is due on the same day.

So the total is fifty-six, not eighty-four — which is better than many contractors assume, and still long enough to be the whole problem. Work done in the first week of a month is paid for around eleven weeks later. You have paid the people who did it twice in the meantime.

What comes off on the way

The certified figure isn't the figure you measured, and the deductions are set out rather than left to judgement.

Retention comes off first, at the percentage stated in the Contract Data, applied until the total held reaches whatever limit that document sets. Then the advance payment repayments, if there was an advance. Then adjustments for plant and materials on site, and for changes in cost where the contract provides for them. Each of those is a line in the Contract Data, and each of them is a number somebody agreed to before the job started.

None of this is unfair, and all of it is cash you have spent and not yet recovered. It is worth knowing which of the gaps in your cash curve are timing and which are retention, because they behave differently: timing resolves every month, and retention sits there until completion.

Interest that runs whatever the Engineer does

Now the provision that protects the arrangement, and it is stronger than its reputation.

If payment does not arrive in accordance with the payment clause, you are entitled to financing charges on the unpaid amount, compounded monthly, for the period of the delay. Unless the Contract Data says otherwise, the rate is three percent above the stated reference rate.

And here is the sentence that matters. The delay period is treated as beginning when the time for payment expires — whatever date the certificate was actually issued. A certificate that turns up three weeks late doesn't push your interest back three weeks. The fifty-six days ran anyway.

That is a deliberate piece of drafting. The clock is tied to a document you control, so neither the person certifying nor the person paying can slow it down by being slow.

Eleven weeks of this track have made a single point in a dozen ways: rights are preserved by notices, served in a form, inside a period, to a stated recipient. Miss the notice and the right stops existing.

Financing charges are the exception. You are entitled to them by request — without submitting a statement, and without any formal notice.

Read that against Week 1, where a letter nobody wrote cost more than the whole job's margin. Here the contract removes the requirement entirely. Asking is enough.

Which raises the obvious question: how many contractors ask? On most projects the answer's none, and late payment is therefore free. An employer who is routinely three weeks late on a million-dollar contract is being lent money by the contractor at no cost, with the contract expressly saying otherwise.

Where the cash gap actually comes from

Put the periods together and the trough Cost & Cash Week 16 described stops being mysterious.

You pay wages weekly and plant hire monthly. You pay material suppliers on their terms, which are shorter than yours. The work in week one of a month enters a statement at the end of that month, is certified up to four weeks later, and is paid up to eight weeks after the statement went in.

Every one of those gaps is a number in the Contract Data or a default in the conditions. None of them is negotiable once the contract's signed, and all of them were negotiable before.

That is the practical reason Week 2 kept insisting you open the Contract Data first. It's where the payment period lives, where the certification period lives, and where the financing rate lives — three numbers that between them decide whether a profitable job is also a survivable one.

Practical insight

Find three numbers today and write them on the front of your cost report.

The payment period from the Contract Data. The certification period. And the financing charge rate. If any of them are blank, the defaults apply, and you should know that rather than discover it.

Then run the arithmetic on your own job. Take the day you submit a statement and add the payment period. That is the day the money is due, and it is the only date that matters — the certificate date's internal machinery. Put that due date in the cash forecast rather than an estimate of when payment usually turns up.

Keep a simple log of statement submitted, certificate received, payment received. Three columns and a date each. It takes a minute a month and it is the entire evidence base for a financing charge claim, which needs no notice and no statement to make.

And if payments are habitually late, ask for the charges. Once, politely, in writing, with the log attached. The conversation that follows is usually about the payment behaviour rather than the interest, which is the point.

Key takeaways

✔ The payment clock runs from the day the Engineer receives your statement, not from the certificate.

✔ Certification is twenty-eight days and payment fifty-six, both from that same day — the first sits inside the second rather than on top of it.

✔ Both periods come from the Contract Data. Twenty-eight and fifty-six are what you get when nobody filled it in.

✔ Late payment carries financing charges compounded monthly, at three percent above the stated rate unless the Contract Data says otherwise.

✔ The interest period starts when the payment time expires, regardless of when the certificate was actually issued. A late certificate doesn't delay your interest.

✔ Financing charges are payable on request, with no statement and no formal notice — the only entitlement in this track that works that way.

✔ The cash trough is not a market condition. It is three numbers in the Contract Data, all of which were negotiable before signature.

What's coming next

Payment assumes everybody agrees what was done. The harder money conversation is about work that was done and is not going to be paid for, because somebody has decided it was never a change at all. A drawing gets revised and the revision is called a clarification. A specification is interpreted more strictly than it was priced. The scope has moved and the contract says it hasn't. Next week we take the quarry haul road — a real situation, on a real port job — and work out whether the road authority's demand was a variation, a risk, or something the contractor had already promised to do without noticing.