A Typical Project - Understanding Cash Flow at the Company Level

As contractors face many opportunities in the market it is important to keep cash flow management top-of-mind.

D. Brown Management Profile Picture
Share

Growth eats cash and just a few hiccups in execution can put just about any contractor in a very bad position.  

Cash Flow: A Typical Project - Understanding Cash Flow at the Company Level

Regardless of how much capital you have or how great your cash flow is currently it is critical to build a culture of managing your cash as if you were counting pennies to make payroll each week.  

The basic cash flow graph at the company level assumes the following:

  • $1M project, 15% gross margin and 16 month construction schedule with 10% company overhead.
  • Labor paid weekly and vendors paid within 30 days of delivery.  No special terms.  
  • No front-loading of the Schedule of Values (SOV) or monthly billings but also no under billings.  
  • Payments within 30 days of billings.  
  • 10% retention billed for upon completion and paid the month following the last billing.  

As you can see a contractor has to leverage quite a bit of capital and their operating Line of Credit (LOC) to operate the business.  

There are about a dozen little tricks that project teams can use to accelerate cash flow substantially.  


We are going to be making our cash flow workshop publicly available in the coming months. 

Please contact us to be informed of the exact release date


A Typical Project - Understanding Cash Flow at the Company Level
Great cash flow is a key driver of valuation and successful successions. Running out of cash is is the #1 reason contractors fail. Improving cash flow improves your Return on Equity. Protect yourself and never let cash flow be the limitation to your profitable growth....

A Typical Project - Understanding Cash Flow at the Company Level
Great cash flow is a key driver of valuation and successful successions. Running out of cash is is the #1 reason contractors fail. Improving cash flow improves your Return on Equity. Protect yourself and never let cash flow be the limitation to your profitable growth....

Communicating as a Leader
Leadership is about the ability to influence and align people. And that is largely about effective communication and consistent actions.
Effective Job Role Descriptions for Organizing, Recruiting, Developing, and Retaining Talent
Clarity in job role descriptions is a foundational building block for successful careers and contracting businesses.
Capital Constraints to Growth (The Basic Formula)
Capital is one of the three primary growth constraints for construction contractors. Use this simple formula to determine how much of your pre-tax net profits need to be retained in the company to support growth and to establish your safe growth limits.