One of the main reasons contractors fail is not that they’ve run out of work but because they’ve not managed their cashflow.

At preconstruction tenders should be cashflowed. If not cashflow positive by month 2, can you afford to fund the project (a big profit may be projected but do you have the cash to get there)?

During the construction stage cashflow forecasts should be regularly updated to include change. Does the timing/nature of the variation affect the projects cashflow in a negative, positive or neutral way; if negative what can be done to mitigate.

Cashflows can be used to identify potential issues. If a valuation is lower than projected why is that, is it due to delay or undervaluation? If over, are you overvalued or ahead of programme. Both situations need to be understood as both can give rise to issues – an undervaluation is obvious but if you have overvalued this will be balanced later so you should ensure you have enough cash to cover.

Project cashflows should be combined to form company cashflows. This will help identifying trends which can be used to increase cash reserves, improve overall cashflow, indicate your capacity for new work.

Companies who control their cashflow stay in business.