Reviewing projects we find many instances of poor cash management.
- Lengthy payment terms;
- Payment terms with your subcontractors / suppliers not aligned with your contract terms;
- Poor valuation control;
- Retention’s left uncollected;
- Condition precedents for payment that are difficult to achieve left in contract;
- Payment protocols not followed;
- Change not captured/claimed;
- No cashflow forecast produced at tender stage to show whether the project would be cashflow positive;
- Tender price/programme slashed in order to win work.
We could keep on, but you get idea.
The reality is it’s pretty simple to avoid these issues:
- At tender stage do a cashflow forecast, do you really want a project that will be cashflow negative;
- Negotiate your contract so it’s fair. Be realistic with yourself, if you don’t understand contract employ someone who does;
- Understand your contract. If you follow the instructions in the contract a majority issues disappear. This is not contractual – its good contract management;
- Keep accurate/detailed records. In a dispute/claim situation the side with the best records has the upper hand;
- If you slash prices/programme to win work on an already competitive bid what do you think is going to happen?
