Cash flow & payment milestones

Abstract

Project Cost Management includes the processes involved in planning, estimating, budgeting, financing, funding, managing, and controlling costs so that the project can be completed within the approved budget.. Two main concerns, that are crucial in Project Cost Management are cash flow and payment milestones.

This article will contain two chapters, one for each issue. Apart from diversification of definitions of cash flow and payment milestones for project, program and portfolio, this article will focus on practical information for Project Managers, and present some real life relevant technics and tools. It will also answer the question "Why cash flow and payment milestones are so important in Project Cost Management?" and how to approach them.

Introduction

Cash Flow definition

Cash flow is a term used to describe money movement (flow) in business in defined time period. Cash flow is determined by the following factors: time, nominal amount, currency and account .There are two main subdivisions of this term - cash flow in and cash flow out.

Cash flow in stands for money that is coming into the business. It may come from investors, who are investing or financing the company, from gathered capital that business owner has, or from profits that business is making from selling products or services.

Cash flow out stands for money that is going out of the business. It may go for covering the wages of hired workers, bills like rental payment or mortgage for facilities or services, and other expenses like taxation.

The difference between cash flow in and cash flow out is called net cash flow.

Cash Flow scheme

Milestones definition

Each project has a determined timeframe, or duration. Milestones are key reference points, or events on this timeline, that are crucial for measuring the project progress and achieving the final outcome. In project management milestones can be called signal anchors (https://en.wikipedia.org/wiki/Milestone_(project_management)) and are used for marking following deliverables:

• Start of the project
• End of the project
• Start of determined phase of the project
• End of determined phase of the project
• Reviews
• Budget checks

Milestones are fixed points, so in contrast to the timeline, they do not have duration, they are fixed dates.

Milestones scheme

Annotated Bibliography

Project Management Institute (2013). A Guide to the Project Management Body of Knowledge (PMBOK® guide)