This metric is the highest level of an “OUTCOME” for cash flow at the project level. It summarizes the performance results of the 18 cash flow tips and provides a great dashboard for integrating operations and accounting.
- Start with a Job-to-Date (JTD) summary of your open projects on your Work-in-Progress (WIP), defining “open” as any project that has remaining costs or outstanding billings to collect.
- Look at JTD Billed from the WIP and your Open Accounts Receivable Aging report to get the net “Cash-In.”
- Look at JTD Costs from the WIP and Open Accounts Payable Aging report to get the net “Cash-Out.”
- Cash-In minus Cash-Out = Net Cash
- JTD Earned Margin - Net Cash = Cash Margin Variance which is the gap that must be covered by a combination of your working capital and your Line-of-Credit (LOC) and is the amount of “financing” you are providing your customers.
- Net Cash / JTD Earned Margin is a percentage that you can graph over time to see a trend in your cash flow management regardless of your monthly volume. Below 100% is the degree to which you are providing financing to your customers. This can also be expressed as a decimal (0.8, 1.1, etc.) as shown on the Contractor Scoreboard.