Cash Flow

Question 1

What is a cash flow projection?

Answer 1

A financial planning tool that shows predicted flow of cash in and out of a project. It is typically shown month by month

Question 2

What letter would a typical cash flow projection form

Answer 2

‘S’ Curve

Question 3

What are the differences between employer and contractor cashflow?

Answer 3

Contractor cashflow will typically show construction costs (mats, labour, plant, prelims etc)
Employer cashflow might be a bit broader and show costs such as consultant and legal fees, design team fees, land acquisition fees etc.

Question 4

How does the employer benefit from accurate cash flow projections?

Answer 4

1) Assists with planning expenditure and ensure that appropriate level of funding is in place for future payments.
2) Allows the employer to gain an understanding of the potential financial commitment at a specific point in the future.
3) Can also act as a sense check for monthly contractor valuations (if contractor cashflow only)

Question 5

If the actual cashflow is behind the projected, what might this indicate?

Answer 5

That the contractor is behind programme

Activity schedule might be used (works need to be 100% complete and free of defects)

The original cash flow forecast might be too optimistic

Question 6

If contractors monthly valuations are ahead of projected cashflow, what might this indicate?

Answer 6

Either that the project is ahead on programme or the contractor is overclaiming