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Cash flow in Horizon Europe projects – from pre-financing, interim to final payments

5th September 2023 at 11:08 am

The most common project types in Horizon Europe, Innovation Actions (IAs) and Research and Innovation Actions (RIAs), typically receive EU funding in the range of four to ten million euro. Although the project budgets and durations can vary significantly, the cash flow in all these projects follows the same rules. Those of you who have been involved in Horizon 2020 but not yet in Horizon Europe projects will be glad to hear that there are virtually no changes in terms of cash flow. Those of you who are participating in an EU Framework project for the first time might be keen on learning more about the “mysteries” of EU funding rules. Sometimes the devil is in the details when managing your organisation’s budget for your R&D activities. We would like to share our knowledge and experience from dozens of completed and ongoing H2020 and our currently 19 Horizon Europe projects. We have been supporting the financial management including the calculation of payments to project partners and the monitoring of the cash flow at project and partner levels.

How does the cash flow work in Horizon Europe projects typically?

The general rules and standards to be followed by project consortia are defined in the EU Grant Agreement which is signed by all beneficiaries. In practice, this translates into the following basic payment schedule: The first payment, the so-called pre-financing, is received at or just before the start of the project, with interim payments being distributed after the end of each reporting period and a final payment after the completion of the project. The actual timepoints depend on the duration of the project, as shown here.

All payments are made to the Coordinator, who acts as the single point of contact to the EC. The Coordinator is then required to distribute each payment to the project beneficiaries, either based on their relative share of the grant or as agreed in the Consortium Agreement (see below). There are three types of payments, all of which follow some easy, yet not always known rules:


The first payment for RIAs/IAs is calculated by the EC based on this formula: 160% x grant [approved EU funding] / number of reporting periods [the number of reporting periods primarily depends on the project duration]. Out of this amount, 5% of the total grant is retained by the EC for the Mutual Insurance Mechanism (MIM). The MIM is required in case of certain defaults in payment, but if these defaults do not occur the amount kept in the MIM will be paid out with the final payment.

Project duration in monthsNumber of reporting periodsPre-financing percentage as calculated by EU (including the MIM contribution)Pre-financing percentage actually paid out (5% MIM contribution subtracted)
24280.00 %75.00 %
30280.00 %75.00 %
36280.00 %75.00 %
42353.33 %48.33 %
48353.33 %48.33 %
60440.00 %35.00 %

Interim payment(s)

The amounts of the interim payments are calculated based on the resources used, i.e. the costs claimed by each partner for the project implementation in the previous reporting period. The beneficiaries can only receive funding for costs accepted by the EC. Each partner receives the amount of its accepted costs from the previous period, up to a cap of 85% of its planned EU funding. In other words, the EU always keeps at least 15% until the end of the project. These 15% include the 5% kept in the MIM.

Final payment

This is fairly straightforward. It is a “payment of the balance”, i.e., if the total accepted costs of a partner are higher than the total payments the partner received, the difference is paid out to the partner. On the other hand, if a partner has already received more than the amount of its accepted costs, the surplus must be returned to the Coordinator. If one or more partners are “underspent”, i.e., they did not spend their foreseen budget, this “leftover” budget can be distributed among those partners who are “overspent”, i.e., who spent more than initially foreseen. Apart from that, there is no clear rule by the EU on how the “leftover” budget should be distributed among the overspent partners, hence the procedure is to be agreed upon by the Consortium.

In sum, the cash flow at the project start is positive, but it may turn negative closer to the project end, where, provided that the planned resources were used, a partner needs to pre-finance costs up to 15% of its budget. For larger organisations, the negative cash flow towards the end is usually no issue; however, for smaller companies, including start-ups and not-for-profit organisations, this can be a problem. Cash planning is a must, and some measures can be undertaken at a project level, such as a payment schedule.

Why can a payment schedule make sense?

The need for cash during different phases of the project depends on different factors and the standard payment schedule might not be suited for your project. Within the Consortium Agreement, you can define a payment schedule. The DESCA Model Consortium Agreement, for example, provides Article 7 which can consider the following aspects:

  1. Some partners might require more resources at the beginning, e.g., for the purchase of consumables or investments for equipment, while costs of other partners may incur mostly at later stages, such as for the demonstration or validation of a new technology at the end of a project. One option can be to allocate/transfer a higher share of the grant at the start to the partner requiring resources early on.
  2. Commercial or not-for-profit partners are required to be financially viable to ensure co- or prefinancing whenever needed during the project. One solution would be to pay these partners either based upon the accomplishment of tasks and achievement of deliverables and/or in shorter intervals such as on a quarterly basis.
  3. Uncertainty of contributions by a partner, e.g. in a first-time collaboration, due to recent changes or other reasons. One way to take preventive measures could be to retain some funds and transfer these upon delivery, like in case number 2.
  4. Some partners might require more and some fewer resources during the project than initially planned. For example, in health projects involving clinical studies, payment based on patient recruitment is commonly agreed on. One strategy is therefore to pay out a certain percentage of the prefinancing or later payments to avoid partners having to return funds to the Coordinator.

Based on our many years of EU project participation at accelopment, we would recommend discussing the need for a project-specific payment schedule already during the grant agreement preparations.

Andreia Cruz
Research & Innovation Project Manager

Dr Johannes Ripperger

Dr. Johannes Ripperger
Research & Innovation Manager