Cash Flow Metrics and The Continuous Improvement Process

Contractors can focus on 3 major metrics to continuously improve cash flow, truly making a “game” out of it.

D. Brown Management Profile Picture
D. Brown Management
November 9, 2018 2 minute read
Share
Cash Flow: Cash Flow Metrics and the Continuous Improvement Process.

Contractors can focus on 3 major metrics to continuously improve cash flow, truly making a “game” out of it.  

  • Cash Metric Trend: This is the ultimate outcome-based cash metric at the company level that operations has control over. It looks at your open Work-in-Progress (WIP) projects and compares the net cash against the earned gross margin. Below 100% and you are financing the construction of the project.  
  • Over / (Under) Billing Trend: A great leading measure and 100% within the control of the project management team utilizing the 18 tips.
  • Collections & Retention Trend: Another leading measure that is a joint responsibility of the project management and finance team.  
  • Identifying the TOP 3 jobs that are the biggest drivers of these lead measures over the last month and then drilling down into them using Root Cause Analysis (RCA) tools to help you see potential improvements.  
  • Prioritize and execute improvements in the short and long term. Get better during the next cycle just like you do with Field Productivity.
  • Utilize A3 Thinking / Reporting techniques for the best results.

Contact us about using a template and process like this for your business.  

Cash Flow Metrics and The Continuous Improvement Process
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....
Previous Next Go To Series
Related Insights Series
Cash Flow Metrics and The Continuous Improvement Process
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....
Previous Next Go To Series
Related Insights Series
Succession Fact #2: Desire & Competencies in the Management Team
Succession Fact #2: No exit strategy or deal structure will create desire, alignment, and competencies in the management team. With that said, it is incredibly important that the exit strategy and structure of the deal maintains and enhances the team.
Related Article
Connecting Metrics to Activities and Outcomes
Outcomes are created through doing the right activities. Data is only a proxy for that activity and a metric is a synthesis of lots of data points. Metrics are valuable, but always have a skeptical view of proxies for performance, especially with growth.
Related Article
Impacted Productivity - Highly variable Labor Scheduling (Level Your Schedule)
The biggest risk for a specialty contractor is the performance of on-site labor. One of the biggest impacts to labor productivity is having a schedule that requires large variations in labor.
Related Article