The Cash Flow is Your Friend

Ah, the power of social media! This week I have a guest post from Stuart Petrie-Tootell, who approached me on Twitter after reading my blog! You can follow Stuart on Twitter here and read his own blog here.

Stuart is a Chartered Quantity Surveyor, and has spent the last 10 years working in the Consulting side of the business. He has spent the last 3 years working in the United Arab Emirates, mostly on projects in the property sector. During his free time he has his hands pretty full with looking after his three children and enjoying all that the UAE has to offer; beaches, malls and 4×4 driving in the desert.

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We’ve all seen the standard shallow “S” curve, the one you find located somewhere at the back of your monthly cost report, and if you’re lucky you receive an “updated” cash flow with each contractors payment application, which shows a variance so wide between “forecast” and “actual” that you would be forgiven for thinking that you were looking at the spend profile of two different projects. Sound familiar?

It shouldn’t be like this, in my view the cash flow forecast should be the most important tool in the PQS’s kitbag and should be looked at with the same level of scrutiny and frequency as a Project Manager does with the programme, after all – isn’t this what it is based on? Too many times I have received a contractor’s cash flow, which comprises a single line item; construction works, and when challenged on how it is built up you get a feeble “it’s just based on a standard “s” curve”. Not good enough guys, as this is the barometer for performance.

These days with pretty much every contractor and probably most sub-contractors having access to software such as Primavera and the like, there shouldn’t be any reason why a project programme can’t be resource and/or cost loaded. Then, it should only be a matter of a few clicks and a nice bit of wizardry in your spread sheet to produce a nice curve, ok so it may be a typical “S” curve – but at least now there is some detail behind it that you can get into and interrogate and you should be confident that the two documents; programme and cash flow are actually talking the same language.

Detail is another key…..I’m not saying we need a cash flow that details right down to every last screw, but let’s at least have the cash flow broken down into the same level of “elemental” or “works package” detail that the programme is; in fact let’s make it a key deliverable under the Contract, detail the requirements in the preliminaries and make it an item for the pre-start meeting agenda.

What I want is not so much a “cash out” schedule, making allowances for payment duration times, retention deductions, advance payment recovery etc (although I acknowledge how useful this is for the Client trying to work out his bank draw down requirements etc), what I want is a tool where I can sit down with the PM, Construction Manager, Architect and say “look guys, in 3 months time we’re due to spend $m on floor finishes; has the “equal or approved” stone type been selected? Has the sample mock-up been signed off? Have we resolved the RFI over screed thickness?”, or “we start to spend on internal doors next month, it’s half way through this month, so why can’t I see any door materials on site? Are you having supplier procurement issues?” etc etc, you get the picture.

Very quickly you can see that it moves away from being something that gets updated once a month when the valuation has been agreed just to show you just how much you missed the months spend target by, to a tool where you as the PQS or PM can actually have a pro-active involvement in steering the Contractor towards the common end goal. Sure, there can be a few difficult details to work out, like; do variations get put below the line or loaded back in to the elements/trades – my view is that it depends on the extent of the scope of the variation – whether a figure has been agreed and an idea of timescale has been considered prior to the VO being signed off, but the main focus is on being able to manage the base contract works.

So to wrap up, the cash flow forecast is something that you should be looking at on a weekly, if not daily basis. Get in there with the Contractor’s QS, find out whether all approvals have been obtained, find out whether orders have been placed, and be looking 3 months ahead to what is going to be needed to complete the project. It is something that sadly some of my PQS colleagues in the past have been less than enthusiastic to embrace – believing that programme and progress is purely the territory of the PM….. (just wait to see the Contract Managers reaction in the next progress meeting when he’s telling you all that the design, procurement, deliveries and physical progress are all in tip-top shape and then you pull out your cash flow which shows things differently!).

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About Me

I’m now the Managing Director of Mynott Associates Limited my own specialist measurement business. I’ve been in the industry all of my life since I left school. My first job was with Bovis Construction as a management trainee where I trained to become a quantity surveyor. I’ve worked for contractors all through my career, I am FRICS, FCIOB and MCIHT qualified and act as an RICS assessor. I’m also a keen Arsenal supporter having followed them from a young boy

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