CON4157 N10 CashFlowS-curve (2021S2)

CON4157"AY2021
CASH FLOW ANALYSIS
What is the objective of cash flow
analysis?
CON4157@VTC2021 CC BB‐NC‐ND 1
CASH FLOW ANALYSIS
The amount of money gain in and expend out day to
day, month to month / quarter to quarter.
To ensure the project progress runs in correspondence
with finance support.
Outline the amount of money to be required from
time being.
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Example
Month Expenses Payment Received
Balance .
HK$ HK$ HK$
January 30,000.00
February 40,000.00
March 10,000.00
April 60,000.00
Total 140,000.00
Example
Balance .
HK$ HK$ HK$
January 30,000.00 0
February 40,000.00 20,000.00
March 10,000.00 100,000.00
April 60,000.00 40,000.00
Total 140,000.00 160,000.00

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Example
Balance .
HK$ HK$ HK$
January 30,000.00 0 (30,000.00)

February 40,000.00 20,000.00 (20,000.00)
March 10,000.00 100,000.00 90,000.00
April 60,000.00 40.000.00 (20,000.00)
Total 140,000.00 160,000.00 20,000.00

Based upon the above example, we can have to consider
that:
In January,
HK$30K has been paid without income.
It indicates a result of negative balance which means the
contractor has to get HK$30K to cover the payment.
In February,
HK$40K and HK$20K have been expended and gained
respectively.
So, the balance is ‐20K which means the contractor has to get
HK$20K to cover the payment.
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In March,
HK$10K and HK$100K have been expended and gained respectively.
So the balance is HK$90K which means this is a surplus and could
pay back the money which was borrowed to cover the previous
months’ negative balance.
In April,
HK$60K and HK$40K have been expended and gained respectively.
It comes to a negative balance HK$20K and to be covered from the
surplus of last month.
Summing up
HK$140K and HK$160K have been paid out and gained in
respectively.
The final balance HK$20K indicates that there is a profit made
from this project.
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Each month’s Each month’s
expenses is receipts is
added to added to
that of the that of the Each month’s
previous previous balance
month (A) month (B) Column (B) –
(A)
Refer to the previous table
Month Expenses Receipts Balance Accumulated Accumulate Accumulated

of Expenses d Receipt of Balance
Payment Payment
HK$(K) HK$(K) HK$(K) HK$(K) HK$(K)
HK$(K)
JAN 30 0 ‐30 30 0 ‐30
FEB 40 20 ‐20 70 20 ‐50
MAR 10 100 +90 80 120 This 40
APR 60 40 ‐20 140 160 is the 20
profit
expenses is receipts is Each
added to added to month’s
that of the that of the balance
previous previous Column
month (A) month (B) (B) – (A)
Payment Payment
HK$(K) HK$(K) HK$(K) HK$(K) HK$
HK$(K)
JAN 30 0 ‐30 30 0 ‐30
FEB 40 20 ‐20 70 20 ‐50
MAR 10 100 +90 80 120 40
This
APR 60 40 ‐20 140 160 is the 20
profit
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expenses is receipts is
added to added to
that of the that of the Each month’s
previous previous balance
month (A) month (B) Column (B) –
(A)

Payment Payment
HK$(K) HK$(K) HK$(K) HK$(K) HK$
HK$(K)
JAN 30 0 ‐30 30 0 ‐30
FEB 40 20 ‐20 70 20 ‐50
MAR 10 100 +90 80 120 40
This
APR 60 40 ‐20 140 160 is the 20
profit
Question
What we could observe from the above?
From the above table, we observe that the picture payment out and in
for a project.
Mainly, it give an overview to the site manager / quantity surveyor that
there is a need to borrow money for the outstanding HK$30K and
HK$20K in Jan and Feb respectively.
The accumulated total is therefore HK$50K to be short.
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Consolidating Cash Flow with
Programed Works
Activity Materials Labor Plant & Total
Others
HK$(K) HK$(K) HK$(K) HK$(K)
Setting Up NIL NIL 30 30
Ground Work NIL 5 NIL 5
Formwork 10 12 NIL 22
Steel Work 15 9 NIL 24
Concreting 15 6 NIL 21
Cleaning Up & NIL 3 NIL 3
Handover
Total 105
Programed Works
Activity JAN FEB MAR APR

Setting up
Ground
Work
Formwork
Steelwork
Concreting
Cleaning up
& Handover
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Programed Works
Setting up
Ground
Work
Formwork
Steelwork
Concreting
Cleaning up
& Handover
Programed Works

Setting up
Ground
Work
Formwork
Steelwork
Concreting
Cleaning up
& Handover
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Programed Works
Setting up
Ground
Work
Formwork
Steelwork
Concreting
Cleaning up
& Handover
Programed Works
Setting up
Ground
Work
Formwork
Steelwork
Concreting
Cleaning up
& Handover
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Programed Works

Setting up 30
Ground
5
Work
Formwork 7 15
Steelwork 12 12
Concreting 21
Cleaning up
1.5 1.5
& Handover
42 27 34.5 1.5
Estimated Expenditures Allocation During Construction
• Setting up will be an expenditure in January since commencement
• Ground will be an expenditure in January
Works
• Formwork half will be the expenditures in January and February
respectively
• Steelwork half in February and March respectively
• Concreting will be completed in March
• Cleaning up half in March and April respectively
& Handover
• Overheads allocated over the construction period
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Additional Cost Data
Presume that there is an additional HK$20K to be paid for indirect costs as the
company overheads.
The total amount of construction will be HK$145K, so the profit margin is to be
HK$20K indeed.
Proposed / Agreed Payment Terms
The payment of work done will be scheduled as below:
HK$20K on completion of ground work.
HK$50K on completion of formwork.
HK$45K on completion of concreting.
HK$30K to be kept as retention money for one month after completion.
Projected Cash Flow Table
Accumulated Accumulated
Receipt of Accumulated
Month Expenses Balance Receipt of
Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 42
FEB 27
MAR 34.5
APR 1.5
MAY 0
Total 105
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Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 42 20
FEB 27 50
MAR 34.5 45
APR 1.5 0
MAY 0 30
Total 105 145
Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 46 20
FEB 31 50
MAR 38.5 45
APR 5.5 0
MAY 4 30
Total 125 145
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Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 46 20 ‐26
FEB 31 50 19
MAR 38.5 45 6.5
APR 5.5 0 ‐5.5
MAY 4 30 26
Total 125 145 20
Receipt of Accumulated Accumulated Accumulated

Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 46 20 ‐26 46 20
FEB 31 50 19 77 70
MAR 38.5 45 6.5 115.5 115
APR 5.5 0 ‐5.5 121 115
MAY 4 30 26 125 145
Total 125 145 20
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Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 46 20 ‐26 46 20 ‐26

FEB 31 50 19 77 70 ‐7
MAR 38.5 45 6.5 115.5 115 ‐0.5
APR 5.5 0 ‐5.5 121 115 ‐6
MAY 4 30 26 125 145 20
Total 125 145 20
Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 51 20
FEB 28 50
MAR 0 45
APR 6.5 0
MAY 0 30
Total 85.5 145
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Receipt of Accumulated Accumulated Accumulated
Payment Balance
Expenses Payment
(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)
JAN 51 20 ‐31 51 20 ‐31

FEB 28 50 22 79 70 ‐9
MAR 0 45 45 79 115 36
APR 6.5 0 ‐6.5 85.5 115 29.5
MAY 0 30 30 85.5 145 59.5
Total 85.5 145 59.5
Cash Flow Forecast / Analysis Diagram
160
140
120
100
HK$
80
60
40
20
0
1/1/2018 2/1/2018 3/1/2018 4/1/2018 5/1/2018
1/1/2018 2/1/2018 3/1/2018 4/1/2018 5/1/2018
Accumulated Expenses 51 79 79 85.5 85.5
Accumulated Payment 20 70 115 115 145
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Lengthen Payments from The Client
When it is known roughly at which dates the client is likely to
pay the contractor, these are used in the analysis.
Let us say that the dates of interim payments should be 20
Sep, 20 Oct or 20 Dec.
Then, if you know that the client is usually 2 months late, you
put the expected payment dates to the end of Nov., end of
Dec, and Jan, in your cash flow analysis.
Lengthen Payments from The Client
Payment terms from terms of agreement
Even some government departments can be slow
at making money available to their contractors, and
the reputations of private clients for prompt
payment can vary enormously.
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Credit Period
Wages are normally paid:
hourly, daily, weekly, biweekly & monthly.
Materials are often paid:‐
By installment
By credit account
Cash on delivery
Supply basis
Fixing basis
Supply incl. Fixing
Level of Accuracy
Preparing a complete and accurate cash flow
analysis can be a time consuming process.
An estimate of the amounts to be paid out and
received at the various stages can be made, if
time is limited.
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Level of Accuracy
In some cases the contractor will know roughly, based on
experience, how much money will out and in.
Of course, he could base the amounts which he anticipates
in the cash flow analysis.
Beware that the previous experience is not always
applying for different kinds of project (e.g. roadworks
instead of buildings) or different employers, they may have
different policy and agreement of payment terms.
Site Costing Objectives
• Cost report in weekly, monthly or
quarterly basis
• Comparison between the budget and
actual expense
• Keep Updates from time to time
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Site Costing Objectives
• Comparison ./. budget and actual expense
• Keep Updates from time to time
• Identification the tolerance and take necessary remedies
• Control the actual expenditure in conjunction with
scheduled
• Variances to be made against variance incurred
unforeseeably and by disruption events
• Analysis to be made in correspondence with the impact
of variances (i.e. claims)
• Feedback / result of increased cost for future reference
Pricing the Estimate
• the estimate is the predicted cost of construction
• the tender is the amount of money for which the contractor offers to
carry out the works and normally include
• the estimate ( Predicted cost / Price)
• an allowance for the firm’s overheads (OH)
• the profit which the contractor wishes to make (mark up)
• allowance for any additional risks (unforeseeable matters).
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All‐in Rates
Labour
A contractor does not only has to pay for the labour
employed at the agreed rate of pay,
They also have to calculate all the additional costs for
employing them (i.e. holidays with pay, insurance, etc.)
Plants are often paid:
Daily, weekly, monthly, quarterly, yearly or
Subject to the terms of agreement
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Plant
Rent rate / Life cycle cost / Operator cost
Material
Supply and installation cost
‐END‐
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CON4157"AY2021

Total 140,000.00 160,000.00

January 30,000.00 0 (30,000.00)

Total 140,000.00 160,000.00 20,000.00

Month Expenses Receipts Balance Accumulated Accumulate Accumulated

Month Expenses Receipts Balance Accumulated Accumulate Accumulated

Activity JAN FEB MAR APR

Activity JAN FEB MAR APR

Activity JAN FEB MAR APR

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

Receipt of Accumulated Accumulated Accumulated

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

JAN 46 20 ‐26 46 20 ‐26

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

(HK$) (HK$) (HK$) (HK$) (HK$) (HK$)

JAN 51 20 ‐31 51 20 ‐31

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