Cash flow

Cash Flow

Introduction

Client Cash Flow

Cash flow is an issue of utmost importance for the client. It represents the timeline of the incurred costs for the project not only during its construction, but also during the life cycle of the project. In other terms, it is the inflow of cash to the contractor form the client, which is necessary for funding the project. The client

Cash flow estimation

A cash flow projection is a business tool of utmost importance for the construction industry, providing a basis for controlling one or multiple projects. The cash flow projection of the project execution team implies whether the project can be funded throughout its whole construction timeline, avoided undesirable events, such as budget shortfall, which maybe in some extreme cases may lead the contractor to bankruptcy. Cash flow estimation is closely related to construction time, as it is a dynamic procedure where project cost meets the project schedule. A cash flow forecast (also called a 'cash flow budget' or 'cash flow projection') helps identify whether a firm needs to borrow, how much, when, and how it will repay the loan. Building a cash flow forecast allows an evaluation of cash resources that are required and when they are required by. Business owners can identify likely future gaps in funding and plan for those gaps accordingly. It is a vitally important tool for predicting the continuing financial health of the business. Additionally, cash flow models enable business owners to assess 'what if' scenarios by changing key variables to see how vulnerable the business is to price changes, staffing levels, exchange or interest rate movements, and other key drivers. In larger organisations the cash flow projection can be integrated with day to day operations. This can help identify what production is necessary, what resourcing is required and can provide an assessment of the capacity within a business.

Tools for cash flow projection

Cash flow estimation with BIM

A unique value of this prototype is dramatically automating the time required to generate cash flow analysis. Traditionally, contractors could spend weeks performing the quantity takeoff, scheduling, cost estimating, and cash flow analysis. This prototype offers a method that can produce a cash flow in minutes. Architects will often propose multiple designs, each represented by its own 3D model. With this technology, contractors would be able to quickly compare cash flow scenarios for each model, which would be potentially useful for value engineering decisions and bidding strategies. Contractors who are considering bidding on multiple projects would be able to quickly perform cash flow analysis for each project and determine which one has the best possibility to earn the highest profit margins. The contractor could then focus its resources on preparing bids for only the most profitable projects.

Annotated bibliography

1. Winch, G. M., 2010, Managing Construction projects, second edition

2. Eastman, C.; Tiecholz, P.; Sacks, R.; Liston, K., 2008, "BIM Handbook: a Guide to Building Information Modeling for owners, managers, designers, engineers, and contractors"

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