Lump Sum Payments: What You Need to Know

Have you already read about lump sum projects? Then let’s explore the financial guidelines of lump sum payments. We’ll guide you through all the payment steps in lump sum projects, but first, let’s cover some basics.
Understanding the payment system in grant projects is crucial for planning effective cash flow in your project. In lump sum projects, the EU financial contributions are defined upfront at the proposal stage. With a few key rules and the right strategy, you can effectively plan your fund flow for success.
The lump sum approach offers a different method for settlement, focusing on the completion of agreed-upon work packages rather than actual cost reporting.
Now, let’s take a closer look at how payments operate under this model.
Here are three steps to receiving 100% of your lump sum grant:

1. Pre-financing

This initial payment is crucial for starting the project smoothly, ensuring you have the resources needed for early-stage activities.
Your Grant Agreement specifies the amount due, payment schedule and modalities. Typically, it’s a fixed percentage of the total grant. But beware, this payment may work differently under various scenarios.

• In single-period projects, the pre-financing payment is usually 80% of the total lump sum.
• In multi-period projects, the initial payment equals 160% of the average EU funding per reporting period.

Note that it is not always like this. Exceptions may happen, depending on the call, specific project risk or other conditions.

2. Interim Payments

To move on to the next payments, let us clarify a few terms. The periodic report is a tool for assessing both the work progress and its compliance with the approved project plan. It is extremely important, as future payments and their amounts depend on it.
The periodic report is divided into two parts:

• Technical part – an overview of the progress of the work strictly related to the project.
• Financial part – calculated automatically based on the lump sum contribution of the completed work packages.

As your project progresses, you will unlock interim payments for completed work packages during each reporting period. These payments follow the schedule set in your Grant Agreement, but first, you need to have your periodic report approved. The payment amount depends on the accepted EU contribution for the completed work, but keep in mind there’s a cap —the pre-financing received + interim payment cannot exceed 85% of the total grant. The key is simple: finish and get approval for your work packages, and the payments will follow!

FYI: Confused about seeing ‘additional pre-financing’ instead of ‘interim payment(s)’ in your Grant Agreement? You’re not alone! If you are wondering what this means for the lump sum model, stay tuned. Our specialists at Polite are actively analysing this issue and will soon publish an article addressing these lump sum doubts and others.

3. Final Payment

The final payment, also known as the payment of the balance, covers any remaining eligible lump sum contributions after the work packages are completed. But first, your final periodic report and all declared work packages need to be approved.
Wondering what happens if a work package is partially completed? In this case, the lump sum contribution will be paid proportionally, based on the approved level of completion.
The final grant amount is calculated in two steps: first, the EU calculates the total accepted contributions for all the approved work packages. Then, they deduct the amounts you have already received from pre-financing and interim payments, and whatever is left is your final payout!

For more updates on lump sum projects, feel free to reach out at hello@getpolite.eu