E-Books

Cash Flow Forecasting for the Construction Industry

Issue link: https://resources.viewpoint.com/i/1090786

Contents of this Issue

Navigation

Page 0 of 3

VIEWPOINT.com.au | +612 9492 4100 W H I T E P A P E R THE UNIQUE CHALLENGES OF BUILDING CASH FLOW FORECASTS IN THE CONSTRUCTION INDUSTRY Any company that can't accurately manage and forecast its cash flow is potentially headed for troubled waters. But the unique challenges and complexities with the construction and engineering sector make cash flow forecasting essential. Taking into account that project durations vary from days to years; broad contract scope of work; variations to scope; and logistical, sequencing of tasks and conditions that can defy belief-how do you make sense of it all? It's vital that companies have the capability to build operating cash flow forecasts, project by project, to ensure that working capital requirements are known and provided for. That way they can meet the ongoing payroll, supplier, and subcontractor commitments and support service payment obligations. Few sectors enjoy the luxury of immediate payment, but the construction industry faces greater complications with progress claim preparation and submission deadlines and varying substantiation requirements, combined with variation and claim negotiation getting in between the 'doing' of the work and finally getting payment. Even the largest construction company can tap out its cash reserves when underlying project revenue and cost forecasts are inaccurate and true project performance is not aligned to the project cash forecast. Insufficient cash reserves or limited access to additional working capital can create a 'perfect storm' which often leads to a higher rate of insolvency and bankruptcy in the construction industry than many other industries. For any construction company to be profitable and stay profitable it needs sound cash flow management and project performance measurement processes in place. CASH FLOW FORECASTING IN THE CONSTRUCTION INDUSTRY This paper discusses the fundamentals associated around the need to aggregate project level information, and the required business and project cash flow control, integration, and automation options that construction companies can implement to accurately and efficiently forecast cash flow.

Articles in this issue

Links on this page

view archives of E-Books - Cash Flow Forecasting for the Construction Industry