Cash flow - Revision history

S162469 at 20:02, 12 June 2017

2017-06-12T20:02:27Z

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	[[Cash Flow]] ~~Cash flow~~ presents an aspect of utmost importance for the cost planning of the project. It is		[[Cash Flow in construction industry]] presents an aspect of utmost importance for the cost planning of the project. It is
	essential that project managers deal also with the project accounting, in collaboration with		essential that project managers deal also with the project accounting, in collaboration with
	the accountant. Cash flow is an ongoing process, in which the project manager must cope with		the accountant. Cash flow is an ongoing process, in which the project manager must cope with

S162469 at 19:42, 12 June 2017

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	==Payment methods and milestones==		==Payment methods and milestones==
	The project payment methods have to be clearly defined in the contract and describe the exact terms of the transactions between the stakeholders. The contracts, naturally, affect the cash flow of the construction project, as they can describe different payment methods, specifically for one particular project. Some typical payment methods are:		The project payment methods have to be clearly defined in the contract and describe the exact terms of the transactions between the stakeholders. The contracts, naturally, affect the cash flow of the construction project, as they can describe different payment methods, specifically for one particular project. Especially, if the client pays for the project at the project completion, the contractor have to search funds from the start to the delivery of the project. Some typical payment methods are <ref name="Marks">Marks, T., 2012, 20:20 Project Managmement: How to Deliver on Time,on Budget and on Spec , p.cm</ref> :
	*Payment on completion		*Payment on completion. However, this type of payment is not usual in construction industry
			*Advance payment. This is the opposite when the client pays in advance some amount of the payment
			*Milestone payments. Payment is made on the successful achievement of a project milestone. The milestone payment can be an agreed percent of the total value or a percentage according to the phase of the project. With the word milestone, it can be the payment is based upon progress in completing on what it has been agreed between the client and the contractor. These type of payment based upon achieving defined percentages of a contractor’s programme of activities is also called as a ‘planned payment’ scheme.

			In construction projects, the identification of the major milestones of the construction process is often the major tool for managing the schedule <ref name="Winch"></ref>, and consequently the managing of the budget of the project. Finally, the payment between the suppliers and the contractor usually take place after the delivery of the service. <ref name="Winch"></ref>

	==Cash flow vs expenditure==		==Cash flow vs expenditure==

S162469 at 19:08, 12 June 2017

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	==Payment methods and milestones==		==Payment methods and milestones==
	The project payment methods have to be clearly defined in the contract and describe the exact terms of the transactions between the stakeholders. The contracts, naturally, affect the cash flow of the construction project,		The project payment methods have to be clearly defined in the contract and describe the exact terms of the transactions between the stakeholders. The contracts, naturally, affect the cash flow of the construction project, as they can describe different payment methods, specifically for one particular project. Some typical payment methods are:
			*Payment on completion

	==Cash flow vs expenditure==		==Cash flow vs expenditure==

S162469 at 18:10, 12 June 2017

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	Additionally, cash flow models enable business owners to assess 'what if' scenarios by changing key variables to see how vulnerable the business is to price changes, staffing levels, exchange or interest rate movements, and other key drivers.		Additionally, cash flow models enable business owners to assess 'what if' scenarios by changing key variables to see how vulnerable the business is to price changes, staffing levels, exchange or interest rate movements, and other key drivers.
	In larger organisations the cash flow projection can be integrated with day to day operations. This can help identify what production is necessary, what resourcing is required and can provide an assessment of the capacity within a business.		In larger organisations the cash flow projection can be integrated with day to day operations. This can help identify what production is necessary, what resourcing is required and can provide an assessment of the capacity within a business.

			==Payment methods and milestones==
			The project payment methods have to be clearly defined in the contract and describe the exact terms of the transactions between the stakeholders. The contracts, naturally, affect the cash flow of the construction project,

	==Cash flow vs expenditure==		==Cash flow vs expenditure==

S162469: /* Uncertainty in cash flow */

2017-06-12T18:03:37Z

Uncertainty in cash flow

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	==Uncertainty in cash flow==		==Uncertainty in cash flow==
	The final cost of successful construction projects is usually well estimated and it does not overrun the available budget <ref name="Chen">Chen, M. T. et al, 2007, ABC of Cash Flow Projections, AACE International Transactions, PM. 02</ref>. However, the actual expenditure during a specified project milestone may vary from the estimated cost at that time of the construction schedule by a large amount. This is due to the fact that the cash flow ~~projection varies fro,~~ the accounting ~~requirements~~ due to a number of factors: <ref name="Chen"></ref>		The final cost of successful construction projects is usually well estimated and it does not overrun the available budget <ref name="Chen">Chen, M. T. et al, 2007, ABC of Cash Flow Projections, AACE International Transactions, PM. 02</ref>. However, the actual expenditure during a specified project milestone may vary from the estimated cost at that time of the construction schedule by a large amount. This is due to the fact that the cash flow projections may differ from the accounting calculations due to a number of factors: <ref name="Chen"></ref>
	*The Project managers are quite optimistic and are more based on the overall cost estimation of the project proposal		*The Project managers are quite optimistic and are more based on the overall cost estimation of the project proposal
	*The client delays his payments milestones due to disagreements and, generally, aggressive contract negotiations with the contractor, resulting eventually in decreasing the amount of the inward cash flow.		*The client delays his payments milestones due to disagreements and, generally, aggressive contract negotiations with the contractor, resulting eventually in decreasing the amount of the inward cash flow.
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	*Changes in materials and prices due to rapid inflation <ref name="Winch">Winch, G. M., 2010, Managing Construction projects, second edition</ref>		*Changes in materials and prices due to rapid inflation <ref name="Winch">Winch, G. M., 2010, Managing Construction projects, second edition</ref>
	*Contingency events and errors in the design process		*Contingency events and errors in the design process

	==Prerequisites of cash flow projection==		==Prerequisites of cash flow projection==

S162469 at 18:02, 12 June 2017

2017-06-12T18:02:12Z

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	==Uncertainty in cash flow==		==Uncertainty in cash flow==
	The final cost of successful construction projects is usually well estimated and it does not overrun the available budget <ref name="Chen">Chen, M. T. et al, 2007, ABC of Cash Flow Projections, AACE International Transactions, PM. 02</ref>. However, the actual expenditure during a specified project milestone may vary from the estimated cost at that time of the construction schedule by a large amount. This is due to the fact that the cash flow projection varies fro, the accounting requirements due to a number of ~~reasons~~		The final cost of successful construction projects is usually well estimated and it does not overrun the available budget <ref name="Chen">Chen, M. T. et al, 2007, ABC of Cash Flow Projections, AACE International Transactions, PM. 02</ref>. However, the actual expenditure during a specified project milestone may vary from the estimated cost at that time of the construction schedule by a large amount. This is due to the fact that the cash flow projection varies fro, the accounting requirements due to a number of factors: <ref name="Chen"></ref>
			*The Project managers are quite optimistic and are more based on the overall cost estimation of the project proposal
			*The client delays his payments milestones due to disagreements and, generally, aggressive contract negotiations with the contractor, resulting eventually in decreasing the amount of the inward cash flow.
			*Bureaucratic collisions and limited managerial capability of the contractor can result in delays, concerning the assembling of the invoice supporting documents.
			*Delays due to the invoice approval cycle by the client
			*Delays in the equipment and the materials of the construction project
			*Changes in materials and prices due to rapid inflation <ref name="Winch">Winch, G. M., 2010, Managing Construction projects, second edition</ref>
			*Contingency events and errors in the design process
	==Prerequisites of cash flow projection==		==Prerequisites of cash flow projection==

S162469 at 17:34, 12 June 2017

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	==Uncertainty in cash flow==		==Uncertainty in cash flow==
	~~Inflation~~		The final cost of successful construction projects is usually well estimated and it does not overrun the available budget <ref name="Chen">Chen, M. T. et al, 2007, ABC of Cash Flow Projections, AACE International Transactions, PM. 02</ref>. However, the actual expenditure during a specified project milestone may vary from the estimated cost at that time of the construction schedule by a large amount. This is due to the fact that the cash flow projection varies fro, the accounting requirements due to a number of reasons

	==Prerequisites of cash flow projection==		==Prerequisites of cash flow projection==

S162469: /* Uncertainty in cash flow */

2017-06-12T15:24:49Z

Uncertainty in cash flow

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	==Uncertainty in cash flow==		==Uncertainty in cash flow==
			Inflation

	==Prerequisites of cash flow projection==		==Prerequisites of cash flow projection==

S162469 at 14:29, 12 June 2017

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	[[Cash Flow]]		[[Cash Flow]] Cash flow presents an aspect of utmost importance for the cost planning of the project. It is
			essential that project managers deal also with the project accounting, in collaboration with
			the accountant. Cash flow is an ongoing process, in which the project manager must cope with
			all the payment costs, through cost projections, during the construction lifetime of the project,
			trying to avoid cash shortfalls. Especially, in construction industry, the cash flow management
			is critical due to retainage, change orders and delays.
			Due to a successful cash flow management the project manager, together with the other
			parties, has to set project milestones and achieve that the project will be cash positive in
			these specific milestones. This procedure leads not only eventually in the efficient operation
			of the construction works and the on-time deliverable of the project, but also help a
			company grow its business. In this wiki article, the questions of what cash flow is, how it has
			to be managed and what project milestones are and how they have to be set, are going to
			be presented in this wiki-article.

	=Introduction=		=Introduction=

S162469 at 14:25, 12 June 2017

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 ==Client Cash Flow==
 Cash flow is an issue of utmost importance for the client. It represents the timeline of the incurred costs for the project not only during its construction, but also during the life cycle of the project. In other terms, it is the inflow of cash to the contractor form the client, which is necessary for funding the project. The client
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 bids for only the most profitable projects.
 =Limitations=