CM - Cash Flow Flashcards
What 2 things does cash flow consider?
How much do we need to pay and when?
How much are we recieving and when?
What is the 5 step process in which payments are arraneged?
Construction occurs, invoice, quality assurance, payment authorised, payment recieved.
How long does it take from an invoice being raised, to payment being recieved?
30 days.
Why do contractors often rely on loands?
To finance interim costs, where the expense is temporally higher than the revenue.
Why should contractors calculate the forward projections of cash flow?
-Lenders will only provide a finite credit limit
-Interest charges on credit
-Can be used to inform scheduling of a project.
If all activities at an early start, what does this mean for expense curves?
Cost accrues early, large overdraft required from the start.
If all activities have a late start, what does this mean for expenses?
Cost accrues late, large overdraft required at end of project.
Some contractors offset overdraft borrowing by requesting up-fornt money from the owner, which shifts the position of the revenue profile and reduces overdraft. How can this benefit the contractor and the client?
Contractor - reduces risk
Client - lowers overall cost
What is the actual cash payment made by the client?
Pay request * (1 - retention %)
What is retention, and when is it released?
It is security, and is released at the end of a project
What is the provisional balance of a project?
Previous months balance + monthly expenses
What is the overdraft charge?
Provisional balance * interst rate (on overdrawn balances)
What is the interim balance?
Provisonal balance + overdraft charge
During the project lifetime, what is the revenue?
The invoice issued in the previous month - retention payment
At the end of a project, what is the revenue?
Invoice issued in the previous month + sum of retention payments - mobilisation payment
