A simple example of how to break out contract revenues, expenses and labor mandays to allow for better cash flow budgeting, scheduling and hiring decisions

1. Matching Revenues, Costs and Cash Flow
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2. Breakdown of total
revenues and costs
over the life of the
contract
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3. Job Number
Job Name
1st app date
Expected start
date
Billings Costs Shop MD Site MD OH MD
Total estimated From contract and detailed budget
Jan
Feb
Mar Split costs
Apr Split billings
across the
May across contract
contract period.
period. Should Break out manday budget across contract period.
Jun Should be
reflect any Should be consistent with the budget. Also should
Jul consistent with
expected be consistent with project work schedule
Aug the manday
over/underbilling
breakout to the
Sep s.
right.
Oct
Nov
Dec
Total - - - - -
Check
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4. Job Number 6666
Job Name Sample
1st app date 08/25/12
Expected start
date 08/15/12
Billings Costs Shop MD Site MD OH MD
Total estimated $50,000.00 $30,000.00 10.00 50.00 4.00
Aug 5,000.00 2,500.00 5.00 1.00
Sep 10,000.00 6,000.00 2.00 10.00 1.00
Oct 15,000.00 10,000.00 1.00 15.00 1.00
Nov 15,000.00 10,000.00 1.00 15.00
Dec 5,000.00 1,500.00 1.00 10.00 1.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Total 50,000.00 30,000.00 10.00 50.00 4.00
Check - - - - -
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5.  Scheduling
 Evaluating hiring needs
 Another cut at identifying milestones
 Cash flow projections
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6. So if you think that the payment terms don’t
matter, you’re wrong…
Take the Random House. Small job, quickly
completed. Why bother the client with a
deposit? Why not just wait until the job is
complete?
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7. A Simple Example:
What you need
9011-Random House
Contract Value $ 4,475.00
Costs Mandays
From Budget
Site $ 1,900.00 4.50
budget Shop $ 1,100.00 2.75
Overhead $ 525.00 1.50
Total $ 3,525.00 8.75
Terms:
Deposit on receipt $1,118.75
Balance n30 $3,356.25
From
$4,475.00
Contract Budgeted gross profit % 21.23%
Budgeted cash flow (profit) $950
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8. Job BurnoffSchedule
9011-Random House
Job
Number 9011 Job Name Random House
1st app Expected
date 05/15/12 start date 05/25/12
Shop Site
Enter totals from
budget
Billings Costs MD MD OH MD
Total
estimated $4,475.00 $3,525.00 2.75 4.50 1.50
Break out by
May $1,118.75 $1,362.50 2.75 0.75
month—general,
big picture
Jun $3,356.25 $2,162.50 4.50 0.75
Total $4,475.00 $3,525.00 2.75 4.50 1.50
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9. Net cash in
Assumptions: Cash In Cash Out (out)
Total
Deposit received before work estimated $4,475.00 $ 3,525.00 $ 950.00
begins
Final payment received net 30
May $1,118.75 $ 1,090.00 $ 28.75
80% of costs paid in same Jun $0.00 $ 2,002.50 $ (1,973.75)
month; balance paid following
month Jul $3,356.25 $ 432.50 $ 950.00
Total $4,475.00 $3,525.00
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10. Net cash in
Assumptions: Cash In Cash Out (out)
Total
Deposit received after work estimated $4,475.00 $ 3,525.00 $ 950.00
begins
Final payment received net 30
May $0.00 $ 1,090.00 $ (1,090.00)
80% of costs paid in same Jun $1,118.75 $2,002.50 $ (1,973.75)
month; balance paid following
month Jul $3,356.25 $ 432.50 $ 950.00
Total $4,475.00 $3,525.00
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11. Net cash in
Assumptions: Cash In Cash Out (out)
Total
Deposit received after work estimated $4,475.00 $ 3,525.00 $ 950.00
begins
Final payment received net 60
May $0.00 $ 1,090.00 $ (1,090.00)
80% of costs paid in same
Jun $1,118.75 $2,002.50 $ (1,973.75)
month; balance paid following
month
Jul $0.00 $ 432.50 $ (2406.25)
Aug $3,356.25 $0.00 $950
Total $4,475.00 $3,525.00
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12. Net cash in
Assumptions: Cash In Cash Out (out)
Total
Deposit request ignored estimated $4,475.00 $ 3,525.00 $ 950.00
Final payment received net 30
May $0.00 $ 1,090.00 $ (1,090.00)
80% of costs paid in same
month; balance paid following Jun $0.00 $2,002.50 $ (3,092.50)
month
Jul $0.00 $ 432.50 $ (3,525.00)
Aug $4,475.00 $0.00 $950
Total $4,475.00 $3,525.00
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13. Cumulative Cash in (out)
Month Case 1 Case 2 Case 3 Case 4
May 29 (1,090) (1,090) (1,090)
Jun (1,974) (1,974) (1,974) (3,093)
Jul 950 950 (2,406) (3,525)
Aug 950 950
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14. Bottom line:
1. Even small jobs can drain cash
2. Small cash drains mean cash not available for startups
3. Effect of small jobs cash drains only multiplied on
larger jobs
4. Banks/sureties understand this effect and want to see
us managing cash rather than being managed by cash
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