1. Commercial Management Level 3 Flashcards
On your Mercury House project can you walk me through how you identified the spare funds and why you decided to hand them back?
How did you ensure accuracy in the cost forecast of the Mercury House cost forecast?
What did you consider within the cost forecast for Mercury House?
You advised on the Gigaclear cashflow due to amendment of payment terms. What were the payment terms and how did you consider this in your advice?
How did you carry out cashflow forecasting on Gigaclear?
What is a cashflow forecast?
What would you have done if you didn’t have the data to carry out the cashflow?
What are the benefits of a cashflow forecast?
On the Gigaclear project, you carried out a cashflow forecast to understand the impact of new payment terms on project cashflow. Can you elaborate on how you liaised with various contractors and suppliers to understand their payment terms?
By implementing effective communication with contractors and suppliers as well as understanding their payment terms set out in the contract, I was able to accurately assess the impact of payment terms of cash outflows. The outcome of this was the incorporation of their payment terms into the cashflow forecast, I was able to better present accurate data for the cashflow forecast.
How this information was used in your cashflow forecast? (Follow up question)
My advice is to integrate information about contractors’ and suppliers’ payment terms directly into the cash flow forecast model. These outflows were on a weekly basis.
By incorporating payment term data into the cash flow forecast, we were able to visualise the timing and magnitude of cash outflows more precisely, enabling us to anticipate and address potential cash flow challenges proactively
While it required some additional time initially to integrate the data into the forecast model, the long-term time impact was minimal, as it streamlined the cash flow forecasting process.
Also, how did you determine that there would be sufficient cash to keep the project going?
My advice is to conduct a comprehensive analysis of projected income and outgoing expenses to assess overall project cash flow viability on a cumulative basis.
Evaluating projected income alongside anticipated expenses allows for a holistic view of project cash flow, enabling informed decisions about financial sustainability.
By analyzing both incoming revenue and outgoing expenses, we could confidently determine that the project had sufficient cash flow to sustain operations, mitigating the risk of cash flow shortages. As the cumulative net cashflow was never negative, this allowed me to advise my client on implementing new payment terms.
On the Mercury House project, you advised moving funds to another project based on your cost forecast. Can you explain the process and considerations that led you to this decision?
I conducted a thorough analysis of the project’s cost forecast, based on an accurate programme, comparing committed spend to projected expenditure.
Upon estimating that the project would only spend £900k instead of the committed £1.3m, I assessed the potential surplus funds.
Considering the need for efficient resource allocation and maximizing project value, I recommended reallocating the surplus funds to another project.
How did you ensure that this would not negatively impact the Mercury House project?
I ensured the stakeholders are fully informed of the financial implications before moving funds across to another project.
I advised that 286k of value would have to be value engineered.
The decision to move funds was made based on the project’s current financial status and forecasted needs, ensuring that essential resources remained available.
Additionally, I communicated transparently with the project manager and stakeholders, providing rationale and ensuring alignment with project objectives to mitigate any negative impact.
