Managing Project Cash Flow Flashcards

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1
Q

Define Cash Flow

A

The transfer or flow of money in and out of the project or company

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2
Q

Key Issues with Cash Flow

A

-Timing
-Time Lags
o Entitlement to receive cash payment vs actually receiving it
o Commitment to making payment vs actually making it
-Credit Arrangements

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3
Q

What is an S-curve

A

A method of visualising the forecasted and actual progression of a construction project

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4
Q

How do costs and time correlate in an s-curve (i.e first 1/3 etc.)

A
  • During the first 1/3 of the duration, the cost accumulates in a parabolic pattern and =1/4 costs
  • Middle 1/3, cost accumulates in a linear fashion =1/2 costs
  • Final 1/3 is a mirror image of the first 1/3 = ¼ costs
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5
Q

Purpose of Cash Flow Forecasting

A
  • Bank loans and monitoring- if banks are funding projects, they will want to know their drawdowns
  • Contractor progress monitoring
  • Stakeholder Management- shareholders and guarantor
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6
Q

Possible actions as a result of cash forecasting

A
  • Early warning to predict insolvency
  • Deciding whether to take on a new contract
  • Renegotiation of overdraft limits supported by reliable forecasts
  • Adjustment of work schedules of existing contracts
  • Negotiation of extended credit with some suppliers
  • Accepting suppliers full credit facilities even if it means temporarily losing some discounts
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7
Q

Reasons actual cash flow may be above/below forecast

A
  • Site/weather conditions
  • Re-sequencing of works
  • Materials on/off site
  • Project progress
  • Front-end loading rate
  • Inaccurate cash flow in the first place
  • Variations
  • Distressed contractor
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8
Q

What is capital lock-up and how can it be financed

A

Negative cash flows at early stages of the project

2 methods of financing:

-Company cash reserves- deprived of interest earning capability of cash. Interest lost charged to project

-Borrowed- interest charged to project

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9
Q

Factors influencing the amount of capital lock-up

A

-Profit Margin

-Loss/Expenses Claim

-Retention

-Front end loading

-Overmeasurement

-Back end rate loading and undermeasurement

-Delay in receiving payments from client

-Delay in paying labour, suppliers and sub-contractors

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10
Q

Cumulative Cash Flow calculations / S-curve calcs row names

A

Value
Cumulative Value
Cumulative value less retention
Cumulative Certificates
Retention Release
Cumulative Retention Release
Cumulative payment received
Profit
Cumulative Profit
Cumulative Cost
Cumulative cash Out
Cumulative Cash Flow

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