Why Every Project must has it.

Creating a payment plan is not just a technical task—it’s a strategic move that can directly affect the success or failure of a project. You might have a solid execution plan, but without financial stability, the project will always be at risk.

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The payment plan is the foundation of this stability. For the client, it represents a cash-

out forecast. For the contractor, it becomes the cash-in roadmap. A smart contractor must challenge this plan against their own expected spending to ensure there are no gaps—because even a short period of cash shortage can disrupt progress and relationships.

But what should a payment plan really look like?

It’s not just the cost histogram exported from Primavera. While a cost-loaded schedule may help, the payment plan needs more than that. It needs strategy, insight, and careful alignment with the contract.

Step one: Distribute the project’s total cost along the project timeline. Whether this is done through a software-generated plan or manually in Excel, the goal is the same: forecast the value to be earned over time.

Step two: Study your contract carefully. Every contract has different payment mechanisms—whether monthly billing, milestone-based releases, or special conditions related to advance payments, retentions, or recovery.

For example, in a typical lump-sum contract:

• 10% advance is paid before mobilization

• The first progress payment may only be paid in month two or three

• Each invoice may deduct 10% retention and 10% recovery from the advance

• The final 5% retention is paid after the defects liability period ends

  
  

In short, every project is unique. Contractors must compare their real-time cash-out flow against the payment plan—even during the tender stage. Doing this early reduces financial risk and keeps the project moving.