Why Cash Flow Matters? Survival Stability Growth

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2 Why Cash Flow Matters? Survival Stability Growth 2/22

3 Myth #1 Cash Flow Profitability Theory & Reality Are Different It is IMPOSSIBLE to have good cash flow without good profitability

4 Myth #2 Finance People Manage Cash Flow Do Firefighters Manage Fires? 4/22

5 Kaizen Improving Cash Flow 1 Detail At A Time

6 1. Relationships Are EVERYTHING! People In Your Cash Flow Process 6/22

7 1. Relationships Are EVERYTHING! Relationship Management Ideas WHO? Project Engineer Inspector Owner s Representative A/P Person Compliance Officer Subcontractor Payroll / Contracts & A/R WHAT CAN YOU DO? Get contact info for everyone and start the relationships Introductory letter to all parties Help your subs / vendors with their certified payroll Make your formats match your customer s as closely as possible Directory feature in Project Management module Memo s & Transmittals for rapid communications 7/22

8 2. Flowchart Project Cash Flow Processes Look For Ways To Improve Them 8/22

9 3. Billing Format / Schedule of Values Loading Format Integration DESCRIPTION VALUE BUDGET CASH 01 Mobilization 10,000 3,000 7,000 70% 02 Submittals & Shop Drawings 7,500 2,200 5,300 71% 03 Materials - Underground 12,500 9,000 3,500 28% 04 Materials - Power Distribution 46,000 35,000 11,000 24% 05 Materials - Conduit & Wire 28,000 21,000 7,000 25% 06 Materials - Light Fixtures 56,000 42,500 13,500 24% 07 Sitework & Utilities 25,000 18,000 7,000 28% 08 Underslab 15,000 9,500 5,500 37% 09 Branch Rough-In (Conduit & Wire) 35,000 22,000 13,000 37% 10 Feeders & Switchgear 50,000 45,000 5,000 10% 11 Lighting Installation 45,000 51,000 (6,000) -13% 12 Fire-Alarm System 20,000 24,000 (4,000) -20% 13 Security System 15,000 19,000 (4,000) -27% 14 Devices & Trim 5,000 7,100 (2,100) -42% TOTALS 370, ,300 61,700 17% 9/22

10 4. Subcontractor / Vendor Pay Schedules Carrots & Hammers = Cash Flow 10/22

11 5. Managing The Schedule Watch Your Manpower Requirements 11/22

12 6. Submittals & The Close-Out Process The Power Of The Submittal Log Build submittals into billing format & get them done quickly! Build major buyout into billing format order as soon as possible Set framework for and do most of the close-out process as early as possible 12/22

13 7. Improve Change Order Processing Time Custom Issues Logs COR s 1. Use project pre-planning to identify changes before you start 2. Get to know everyone involved in approving your change requests 3. Find out exactly what the specified change processing time is 4. If a time isn t specified in the contract try to insert your own clause 5. Setup a change request as soon as you THINK there may be an issue 6. Make pricing change orders a top priority in the company 7. Manage all your documents electronically 8. Attach all supporting documents to your change request in one PDF 9. Make sure your backup format meets the contract requirements 10. Build your change request format to match the customer s 11. Get change requests on billing format as soon as they are submitted 13/22

14 8. Compliance Documents Don t Let Them Stop Payments Insurance certificates Certified payroll Fringe benefit statements Lien releases Daily reports Safety meetings Incident reports Custom issues Tasks Document tracking 14/22

15 9. Punch Early Punch Often Don t Let It Hold Your Retention Don t wait until the end Make your own punch list Make a list every few hundred man hours Note areas where others are impacting your work Resolve punch list items fast Custom issues Tasks Meeting Action Items 15/22

16 10. The Close-Out Process Don t Let The Last 5% Cost You 20% O&M manuals Spare parts As-built drawings Test reports System training Submittal Log Custom issues Memo s & Transmittals Tasks Meeting Action Items 16/22

17 Ten Ways ForeFront Can Help Involving Your Team For Success 1. Directory feature in PM module map critical RELATIONSHIPS 2. Use Speed Memo / Transmittals for rapid COMMUNICATIONS 3. Cross-Project Reporting make sure PROCESSES are being followed, data entered and documents scanned 4. Budgeting / Draw Requests use them to create a CASH PLAN 5. Use budget cross-referenced with schedule to fight for LEVELING 6. Submittal Log be detailed and make sure everything is done FAST! 7. Use Change Request log to track EVERY potential change 8. Tie all BACKUP documents to Change Requests for rapid processing 9. Document Tracking find MISSING compliance documents 10. Custom Reporting find LAGGING documents across the company 17/22

18 11. BONUS - The Cash Flow Game Involving Your Team For Success Recognize that almost everyone has an effect on cash flow Train them on the financial basics and how they can improve cash flow Brainstorm ways to improve cash flow on a regular basis Discuss over / under billings candidly at regular meetings Hold PM s accountable for A/R problems 18/22

19 Don t Forget Human Nature It s All About People People don t do what you EXPECT, they do what you INSPECT. Lou Gerstner, Ex-CEO of IBM 19/22

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21 About David Brown Experience & Approach 17 years in the construction industry Electrician Superintendent PM Executive Career stints working for general engineering contractor & CPA firm Managed projects from service through $20M Troubleshooting & claims since 1997 Worked with ForeFront since (916) Increasing productivity by merging field & project management processes with accounting and technology. 21/22

22 Additional Training / Consulting Integrating Operations & Acctg. Customized programs available that tie specifically to your company processes and ForeFront Contact your inside sales rep or account manager with Dexter+Chaney for more information 22/22