Getting paid: valuations, progress billing and the cash-flow trap

The contract price is what the job is worth. Cash flow is whether you survive long enough to earn it. These are two different things, and fit-out contractors go bust confusing them.

A job can be profitable on paper and run out of money in the bank. The defence is billing for work done as it is done, and understanding what is held back.

Bill for work done, not at the end

A fit-out pays out every week. Wages on Friday. Materials on delivery. Subcontractors at month end. If the money coming in arrives only at handover, the contractor is funding the entire job from their own pocket for months — and most pockets are not deep enough.

Progress billing matches the money in to the money out. Each period — usually monthly — the contractor invoices for the value of work actually completed in that period. The client pays against measured progress, not against promises.

Billing once at the end	Billing as you go
The contractor funds the whole job from cash	The job largely funds itself
One large invoice the client will pick apart	Regular invoices the client gets used to paying
Problems surface at handover, when it is late	Problems surface early, while they are cheap
Profitable on paper, starved in the bank	Cash flow tracks the work

The valuation — measuring what is done

A valuation is the QS walking the site and measuring how much of each BOQ line is physically complete this period. It is not a guess and it is not a feeling — it is measured quantity against the priced list.

1. Measure each BOQ line on site

   For every item, how much of the quantity is done. 30 of 42 square metres of partition, 18 of 22 square metres of marble fixed. The number is physical.

2. Multiply by the rate

   Measured quantity times the BOQ rate gives the value of that line this period. Add up every line and you have the gross value of work done.

3. Subtract the previous valuation

   Each valuation is the value to date, not the value this period. Subtract what was already valued last period to get this period’s number.

The discipline is that progress is measured, not asserted. A valuation that says “about 60 percent done” with no measured backing is a number someone invented, and it will be argued.

A worked period, in numbers

Picture a flat fit-out with a contract value of 500,000. By the end of month two, the QS measures work done to date at 200,000. Last period’s valuation was 120,000.

Line	Amount
Work done to date (measured)	200,000
Less previous valuation	120,000
Gross value this period	80,000
Less retention at 5 percent	4,000
Less advance already paid, now recoverable	20,000
Net invoice this period	56,000

Read the table carefully. The contractor is owed for 80,000 of work, but does not invoice 80,000. Retention of 4,000 is held back against the defects period, and 20,000 of an earlier advance — money paid up front to mobilise — is now recoverable because the work it covered is done. The invoice is 56,000, and every figure on it is defensible against the BOQ.

Retention held and released

Retention is the slice held back from every valuation until the defects period ends. Typically five to ten percent, banked over the life of the job and released in full once the work is confirmed sound — sometimes half at practical completion, the balance after the defects liability period.

Retention is not lost money. It is money paid late, against the small defects that surface after handover. The trap is treating it as if it were never coming, and finding at the end that a large sum is owed to a contractor who has already spent against it.

The cash-flow trap

Here is how a profitable job runs out of cash. The contractor bills honestly but infrequently. The client pays thirty or forty-five days after invoice. Retention is held. An advance was paid early and is now being recovered. Meanwhile, subcontractors and suppliers are paid on tighter terms than the client pays on.

The arithmetic turns negative: money goes out faster than it comes in, even though the job is profitable on the BOQ. The contractor borrows to bridge the gap, the borrowing eats the margin, and a job that was won well is lost to timing.

The defence is three habits: value and bill every period without fail, know the retention and advance positions cold, and never let the gap between money out and money in stretch beyond what the business can bridge.

What this looks like in Taskity

Each period’s valuation is measured against the BOQ lines, retention and advance recovery are calculated against the contract terms, and the resulting invoice is generated from the same lines. The cash position of the job — billed, paid, retained, recoverable — is visible against the work done, so the gap between money in and money out never goes unnoticed.

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