The biggest cash flow variable for a contractor is their projects. Cash flow is a critical scoreboard metric for contractors.
No amount of excellence in collections will help you get close to 100% if you are continuously under-billed on your Work-in-Progress (WIP) as a whole.
Contracting is a very capital-intensive business and it is critical to constantly be watching cash flow performance. This metric is the highest level of an “OUTCOME” for cash flow at the project level, summarizing the performance of ops and accounting.
cash flow metricsAssuming that a contractor’s project team has done an effective job of aggressively billing the project, the biggest variable that remains for cash flow is the effectiveness of collections.
Cash flow is critical for the sustainable growth of a construction contractor and one of their key scoreboard metrics. Here's a recap of the 4 Myths, 18 Tips, 5Cs of Credit, and the 4 Metrics & Trends of Cash Flow.
Having a high-level scoreboard for a contractor is just the beginning. The much more valuable part is breaking these high-level scores down into specific and prioritized metrics at each level within each functional area of the organization.
Contractors can focus on 3 major metrics to continuously improve cash flow, truly making a “game” out of it.
Imagine creating a culture where everyone ran into work with the same energy that fans and players run into a sporting event.
It is nearly impossible for a contractor to have consistently great cash flow if they have a Schedule-of-Values (SOV) that isn’t loaded properly and integrated with the project schedule, including a projection of the cash flow.
When leading any team to victory, you can’t underestimate the value of strategy or that burning desire to win built deeply within yourself and everyone else on the team. They only represent a small part of what it takes to win consistently.