HNDE(CIVIL)
CE 3118 Management of Civil Engineering Construction
Cash Flow Forecast
By:
Mrs.Thusyanthi Rajakumaran,
B.B.A(Hons)1st class (Fin.Mgt)
M.A(P.A)-Distinction
M.Phil (Fin.Mgt)
Present: Lecturer
Department of Accountancy
Advanced Technological Institute
Jaffna
Former: Asst. Lecturer
Department of Management
Faculty of Management studies and Commerce,
University of Jaffna.
Cash Flow Forecast
A cash flow forecast is an estimate of the amount of money expect
to flow in and out of the business.
It includes all projected income and expenses and usually covers the
next year, though it can also cover a shorter period such as a week or
month.
• A cash flow forecast is a document that helps estimate the amount of
money that'll move in and out of the business.
• It also includes the projected income and expenses. Cash flow forecasts
typically cover the next 12 months, but can also be used for shorter
periods of time – like a week or a month.
Client cash flow
• In very general terms, 'cash flow' is the movement of income into
and expenditure out of a business (or other entity) over time.
• In construction, however, the term 'cash flow' typically refers to an
analysis of when costs will be incurred and how much they will
amount to during the life of a project.
7 Tips For Managing Cash Flows On Construction
Projects
• Know your client. ...
• Start with a realistic and profitable estimate. .
• Perform a cash flow forecast or projection. ...
• Negotiate favorable contract terms. ...
• Be aggressive in collecting payments. ...
• Stay on top of change orders. ...
• Close out the project.
Forecasting
• Forecasting is a very important strategic task within the project
control framework. ...
• A good forecasting technique, therefore, needs to include both
historical trend-based data and competent judgements based
on construction experience and knowledge.
• Predicting cash flow is important in order to ensure
that an appropriate level of funding is in place and
that suitable draw-down facilities are available.
• Until the main contractor has been appointed, cash
flow projections are likely to be based only on agreed
fee payment schedules for consultants and a simple
division of the construction cost over the
likely construction period (or perhaps an allocation
of construction cost over an s-curve distribution).
• It is only when the main contractor is appointed,
a master programme prepared and some form
of payment schedule agreed that cash flow
projections become reliable.
• Cash flow projections may be affected by the need for the early
purchase of long-lead time items or by items that the client may wish to
purchase that are outside of the main contract(such as furniture or
equipment).
• Contractors have to have money coming in to
pay suppliers and subcontractors and for the day-to-day running of the
business.
• Cash is also important because it later becomes payment for things that
make the business run: expenses like stock or raw materials, employees,
rent and other operating expenses. ... Positive cash flow means the
business is running smoothly.
• Understand the Benefits of the Cash Flow Statement. Most businesses
prepare three primary financial statements —
the balance sheet, income (profit and loss) statement, and statement of
cash flows.
• It's the third of these statements that often provides the most insight
into day-to-day operations
