A new construction project can be exciting, but ensuring positive cash flow for the project can be a daunting prospect. There are various causes behind cash flow problems in a construction project, and the last thing you need is your construction project coming to a grinding stop because of cash flow issues. Allow PPQS quantity surveyor Cape Town to manage your construction project’s cash flow to ensure the project is a success.
Cash Flow in Construction Projects:
Every construction project is concerned with maintaining a positive cash flow. Cash flow refers to how much money the construction project is receiving and spending throughout the project. A successful construction project ensures that they have a positive cash flow, or that they have more money than expenses at any given point during the project.
Most construction projects will start with already procured funds, whether this is through an investment or a loan. This amount is used to budget the construction project, which will include payment of contractors, materials, and ensuring daily operations can occur. Cash flow is managed to ensure that all these expenses can be covered on a month-to-month basis until the project is completed.
Ensuring positive cash flow is easier said than done. There are various ways your cash flow can be affected, whether by poor initial budgeting, lack of involvement in the project, or difficult payment terms. Luckily, PPQS quantity surveyor Cape Town is here to assist.
Managing Cash Flow with PPQS Quantity Surveyor Cape Town:
If cash flow problems for your upcoming construction project are keeping you up at night, PPQS quantity surveyor Cape Town is the solution. PPQS quantity surveyor Cape Town will help you manage your construction project’s cash flow to help you prevent any construction cash flow problems.
PPQS quantity surveyor Cape Town is here to assist you through every step of your construction process to ensure that you maintain a positive cash flow. We would start with a viability study of your proposed construction project. Our viability study takes into consideration aspects such as cash flow projections and all professional fees. We will provide you with all the necessary information you need to make sure this construction project will be worth the investment.
PPQS quantity surveyor Cape Town will then provide you with a cost estimation for your construction project. Cost estimation is critical to ensuring that your construction project maintains a positive cash flow. We will calculate an elemental estimate of your construction project’s costs and this information will be used to ensure your project budget is created in an informed and accurate way.
PPQS quantity surveyor Cape Town will also assist you with tender documents. We will aid you with compiling, issuing, and assessing the tendered documents. This process will be done with efficiency so that you can find the best contractor for your construction project’s budget. A reliable and suitably priced contractor is critical to ensuring positive cash flow in your construction project.
Cash flow problems can occur when you pay for incorrect materials or materials that have not yet arrived. Cash flow problems can also occur if you pay for services that have not been completed to satisfaction. PPQS quantity surveyor Cape Town will evaluate your construction project every month to ensure that these payments do not occur, and therefore maintains a positive cash flow.
As your construction project develops, there may be changes that need to occur to the budget. PPQS quantity surveyors will keep a firm grip on your cash flow and review your budget consistently. You will be kept informed of any possible changes to the budget, and these changes will be accommodated to ensure positive cash flow is maintained. Partner with a PPQS quantity surveyor Cape Town to ensure your construction project maintains a positive cash flow and is completed as a success.
Causes of Construction Cash Flow Problems:
Construction projects are expensive, and the last thing you need is to run into cash flow problems mid-way through construction. We explore a few of the causes behind cash flow problems in a construction project. If you are looking to avoid these problems, PPQS quantity surveyor Cape Town is just the partner for you.
1) Budget Problems:
Every construction project needs a budget. Not just a slap-dash “this should be fine” budget, but an accurate and well-planned budget. Your budget will be based on your elemental estimates of the cost of your construction project and your cash flow forecasting. Your budget will therefore ensure that at every step of your construction project you will have adequate funds to cover your expenses.
If you have based your budget on an inaccurate cash flow forecast or cost estimates, your budget will be incorrect and your construction project will face cash flow problems. Your budget also needs to include a contingency plan. A contingency plan, or an allowance for unexpected costs, will ensure that you remain in a positive cash flow position. Not having a contingency plan can have dire impacts on the cash flow of your construction project.
With PPQS, a problem with your budget will not occur and therefore your cash flow will not be affected.
2) Not Keeping Your Finger on the Pulse:
Construction projects need your constant attention. There is no such thing as kicking back and relaxing after the planning and budgeting to allow the construction project to move forward on its own. You need to keep your finger firmly pressed on the pulse of the construction to prevent these possible problems.
Construction Problems: Problems tend to occur during construction projects. Mistakes can occur, contractors can quit, and your completed phases may not be up to code. If you do not have your finger on the pulse, you may not notice these problems occurring. Problems in construction tend to only lead to more problems, therefore you must be able to deal with problems immediately.
Editing Budget: As the construction project continues, you may need to make alterations to your budget. This is fairly normal and is not necessarily a problem if you created an excellent budget at the beginning of the project that allowed for these possible changes. If you are not involved and keeping an eye on the construction project’s progress, you may not be aware of the need for budget alterations, which can affect your budget at the end of the project.
Missed Discounts: By keeping your finger on the pulse of your project, you may become aware of possible discounts. This might include paying contractors upfront, pre-ordering materials, or hiring plant during specific seasons. A lack of involvement in your construction project might cost you more money without you realising it.
PPQS quantity surveyor Cape Town offers a project management service where we will assist you throughout the project to ensure that everything is running smoothly and there are no unexpected problems with your cash flow.
3) Mishaps with Materials:
There are numerous ways that materials can cause cash flow problems in a construction project.
Over-ordering Materials:
One way to quickly overspend your budget is by ordering excess materials. This mistake can easily occur but can throw off your budget and result in a cash flow problem as you are wasting precious resources on materials that will not be used.
Under-ordering Materials:
While over-ordering materials can cost your construction project money, under-ordering materials can also have expensive ramifications. Under-ordering materials is simply a waste of time, and time is an expensive commodity in construction projects. You will have to reorder the missing materials, and then possibly pay additional delivery fees.
A close-up of a building
Description automatically generated with low confidenceWhen your construction project is in motion, you will have various contractors hired at specific times to perform their relevant jobs. By under-ordering materials, you may have to pay your contractors for additional time as they will have to come back at another date to complete the job.
Increase in Material Prices:
Construction projects do not happen overnight. Depending on the scale of your project, it may be years until the project is completed. This time can increase material prices. If you do not account for these increases, your budget for the end of the construction project will be affected and you may have to sacrifice critical aesthetic elements.
Purchasing Incorrect Materials:
A simple mistake of ordering and paying for the incorrect materials can throw off your positive cash flow as you have made a payment that was not allocated within your monthly budget. On top of the wasted money spent on the incorrect materials, you may also have caused a delay in your project which will have additional costs, such as having to ask your contractors to come back at another time to install the materials. PPQS can ensure that all cash flow problems pertaining to material mishaps will be efficiently and correctly managed.
4) Too Many Contractors on Payroll:
Cash flow problems can occur if there are too many contractors on the payroll at one point. Too many contractors can result from inaccurate planning or a delayed schedule that has resulted in more contractors working at once than what was expected. This will then put pressure on your monthly cash flow. This problem will not affect your construction cash flow when you partner with PPQS quantity surveyor Cape Town.
5) Stressful Payment Schedules:
Poor planning of payment schedules with material suppliers or contractors can result in cash flow problems throughout your construction project. If you have promised suppliers or contractors a payment schedule that does not coincide with your monthly budget, your project may face severe consequences, such as contractors withholding services until payment or suppliers withholding materials.
Both of these problems will delay your construction project, which can further damage your cash flow at the end of your project. PPQS will ensure your construction project is carefully planned and managed to avoid the effect of stressful payment schedules on your cash flow.
6) Investing Money:
Many construction projects choose to invest a portion of their budget intended for the end of the project to accrue interest in the interim. This can be a wise decision, but it can also result in you being strapped for cash if an unexpected cost occurs. We recommend careful consideration when it comes to investing your project budget before making this decision.
7) Delayed Transfers:
The majority of the time, construction projects are intended for selling to make a profit. If there are any problems during the construction process, such as mismanagement of the budget which delayed completion, you are delaying your transfer period and income. Delayed transfer can result in increased costs at the end of your project if your project cash flow was dependent on the sale’s income.
PPQS will assist you in ensuring the successful completion of your project within budget and the determined schedule. Partner with PPQS quantity surveyor Cape Town to ensure your construction project’s cash flow is efficiently and correctly managed.