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.

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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

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