How do you manage cash flow and budget during your construction project?

Cash flow is the backbone of every construction project. Managing it starts from the contract payment terms; streamlining the payment terms to be realistic with the delivery dates of every single activity. It doesn't stop there, updating the cash flow schedule each time changes occur; be it change order or fluctuation is also important to keep the stakeholders abreast of all changes.

Interesting. First, have an approach to create a knowledge-based structure of people and processes. Secondly, develop a project network and monitor it based on the earned value concept to track indicators like CPI and SPI, balancing time and cost. Lastly, apply value engineering at the design, procurement, construction, and closure phases. Footnote: Continuously update forecasts and convert budgeted values to target values using the above three approaches. Ensure Target values < budgeted values ??

The timeline needs to be realistic. Majority of the time it will be extended another 6 months. If you are obtaining a construction loan, the lender will also add that to your timeline.

Hard cost is also the terminology for Direct Cost. Soft cost is indirect cost. Hard cost is usually calculated by the construction side and soft cost is calculated by the development side, typically the Financial Controller and CFO.

Timeline is key so you can determine how much to float the expenses and payroll before you secure a loan. Be cautious of violation tickets. These are big ticket items that many didn't take into consideration.

You will need to create a bunch of codes in the Chart of Accounts as if they were P&L items. Construction uses mainly the balance sheet and cash flow statement.

Be sure to monitor your COGS versus accounts received. Don't make the mistake of acting as the bank for your clients project. We have weekly meetings to ensure the job has been billed or paid in excess of COGS to ensure we aren't financing the work.

Ensure your clients are fully aware of their standings and time elapsed since pay was requested. Often times I find that my contact is unaware a bill is past due or even submitted. These services are handled outside the Construction team and everyone "assumes" the process is flowing. I make sure to copy all my owners when submitting for approvals from Architects and Engineers. This method also provides them the ability to forecast cash flow.

It is my opinion, and that of several of my counterparts, that an end of job evaluation is entirely too late for any type of analysis to occur for profit evaluation. If you are not monitoring costs and spend throughout every step of the job, the only info you will find at the end is a surprise whether good or bad and make it impossible to establish a net goal for YE.