Key takeaways
- Being 80% sold does not mean receiving 80% of the cash. In the example project, the cash actually received by completion is THB 588m, equal to 35% of the value sold.
- Before completion, the project has already paid out THB 1,487.7m including interest, so customer instalments do not cover the construction cost.
- The big lump sum arrives after completion, so what must be managed is the matching of periodic receipts and payments, not cumulative sales.
Sales and cash run on separate tracks
Cumulative sales is the figure the sales team reports, but cash comes in according to the instalments in the contract. If customers pay 20% at contract signing, 15% in instalments in line with construction progress and 65% at transfer, the largest sum arrives only after completion. Construction costs, meanwhile, must be paid from the first month. The two tracks can therefore never match naturally. Think of taking pre-orders but having to pay for production before the customer pays the final instalment.
Matching receipts and payments by period
Example project: payment terms 20/15/65, 80% sold, construction completes in month 30, and the sold units transfer over 4 months (40/30/20/10%). Figures are in THB million.
| Month range | Cumulative sales | Receipts | Payments | Net | Equity injected | Debt drawdown (repayment) | Gap (repayment) | Cumulative before financing |
|---|---|---|---|---|---|---|---|---|
| −12 to −7 | 0% | 0.0 | 250.0 | −250.0 | 250.0 | 0.0 | 0.0 | −250.0 |
| −6 to 0 | 20% | 84.0 | 181.6 | −97.6 | 97.6 | 0.0 | 0.0 | −347.6 |
| 1–6 | 32% | 59.6 | 76.2 | −16.6 | 16.6 | 0.0 | 0.0 | −364.2 |
| 7–12 | 44% | 81.0 | 163.7 | −82.7 | 35.8 | 47.1 | 0.0 | −446.9 |
| 13–18 | 56% | 119.7 | 313.0 | −193.3 | 0.0 | 197.6 | 0.0 | −640.2 |
| 19–24 | 68% | 137.5 | 360.4 | −223.0 | 0.0 | 205.3 | 29.9 | −863.2 |
| 25–30 | 80% | 106.3 | 110.3 | −4.0 | 0.0 | 0.0 | 19.8 | −867.2 |
| 31–36 | 95% | 1,372.9 | 100.2 | 1,272.7 | 0.0 | (450.0) | (49.7) | 405.5 |
| 37–48 | 100% | 139.1 | 59.9 | 79.2 | 0.0 | 0.0 | 0.0 | 484.7 |
| Total | 2,100.0 | 1,615.3 | 484.7 | 400.0 | 0.0 | 0.0 |
Total payments cover land, construction, soft costs, marketing, commission, Specific Business Tax (SBT) of 3.3% and the 1% of the transfer fee borne by the developer. They exclude interest, which is calculated separately on the outstanding debt. The equity, debt drawdown and gap columns already include interest paid along the way, so they are slightly higher than the net sum of cash. Because of rounding, figures may differ slightly from the totals.
Reading the tight points in the table
- Months 7–24 Receipts average about THB 14–23m per month, but payments average as much as THB 60m per month in months 19–24.
- Month 30 80% of THB 2,100m sold is THB 1,680m, but cumulative receipts are only THB 588m. The THB 1,092m awaiting transfer is not yet cash.
- Equity of THB 400m is used up by month 10, and the THB 450m facility is full around months 23–24. The excess is a funding gap of THB 49.7m, which needs additional sources of funds.
- Months 31–32 Transfer proceeds come in and repay the entire debt, which shows that a one-month delay in transfers has a direct effect on debt repayment.
Sources & Uses at month 30
Cumulative Uses
| Land, construction, soft costs and selling costs (before transfer) | 1,455.2 |
| Interest | 32.5 |
| Total | 1,487.7 |
Cumulative Sources
| Customer instalments | 588.0 |
| Owner's equity | 400.0 |
| Construction loan | 450.0 |
| Funding Gap | 49.7 |
| Total | 1,487.7 |
When actual sales differ from plan
| Case | Sold at completion | Peak Funding | Funding Gap | Net profit | Equity IRR |
|---|---|---|---|---|---|
| Base Case | 80% | 867.9 | 49.7 | 359.3 | 21.2% |
| Sales 25% slower | 62% | 988.2 | 175.0 | 354.6 | 16.8% |
| 8% cancellations at transfer day | 80% | 867.9 | 49.7 | 277.6 | 17.0% |
This table does not count receipts from reselling cancelled units, so it is a conservative view, and it assumes that payments already made are forfeited, which must be checked against the actual contract. Cancellations do not affect the Peak because they occur after that point, but they reduce debt repayment and profit. Slower sales, on the other hand, raise the Peak immediately, so they must be monitored before it is too late.
Managing the inflow side
The collection process should assign responsibility from booking through to transfer. A payment that is one instalment late is the same as borrowing one more instalment.
| Receivables ageing | Action |
|---|---|
| Current (0–30 days) | Reminder 7–14 days ahead of every instalment |
| 31–60 days | Follow up and offer payment options |
| 61–90 days | Formal notice and contractual penalty |
| 91–180 days | Legal notice |
| More than 180 days | Terminate the contract or take legal action as the contract provides |
Managing the outflow side
- Certify progress payments in sequence: the contractor submits a claim, the site engineer inspects, the QS measures quantities, and then Finance approves.
- Check advance deductions and retention on every progress payment.
- Schedule payments to match inflows, especially in months with a large certificate.
- Negotiate credit terms of 30–45 days before work starts, knowing that this may be traded for a performance bond or a higher price.
- Consider a performance bond in place of part of the retention where it is worthwhile.
- Defer non-urgent items, such as landscape or FF&E, where this does not affect the handover date.
The funding shortfall must be known months in advance, not discovered when there is not enough cash to pay. See how to build the table in monthly funding gap analysis