“In preparing for battle, I have always found that plans are useless, but planning is indispensable.”
This is true whether it is planning for project execution or planning out your cash flow on the project.
- Look at what you can expect from the project from a cash flow standpoint with good collections (30 days) but without any other tweaks to the process.
- Without factoring in overhead costs just at the project level, the project has negative cash flow until month 11, peaking at -$117K.
- With a good Schedule-of-Values (SOV) and schedule management, the project becomes cash flow positive by month 4 and only peaks at -$68K.
- Factoring in overhead and looking at your Return-on-Capital (ROC) pre-tax after 12 months goes from about 31% to 48% - an increase of 17%!
- Since capital is one of the Three Basic Constraints of a contracting business, improving your use of this resource is huge.