Cash flow analysis for construction projects is crucial to ensure that the project can be completed without taking on more debt and slowing the process down.

Why is it important to monitor cash flow?

It allows you to use cash available to pay for supplies, payroll and other expenses without needing to take on debt. If you can meet your expenses without additional debt, it reduces project risks and improves profitability.

How can you improve your cash flow?

Create a Budget and Stick to It

Budgeting is one of the most difficult aspects of running a profitable business. If you underestimate costs and demand an upfront payment from customers, you risk running low on cash flow if your budget isn’t accurate.

You need to create a budget and stick to it.

The budget should include:

• Agreements from suppliers on pricing
• Overhead for manhours on the project
• Costs for hiring third-party contractors, such as a plumber or electrician
• Everything necessary to be as accurate as possible

Finally, you’ll want to pad the budget by 10% to 20% because projects can easily go over cost. If you pad the budget, it will help you better account for unexpected expenses, which happen in construction all the time.

Of course, budgets are difficult to devise. You’ll want to get organized so that you can provide an accurate estimate to the customer and budget to internal stakeholders.

Get Organized

Organization is key in construction because small costs can quickly add up. You need a way to stay organized, and it’s best to use a central budgeting system for this process. The system should have the functionality to keep the following organized:

• Documents
• Materials
• Personnel
• Processes

Tracking using the right project management tools can greatly improve cash flow. Inside of your tool, you should allow access to real-time cost data, such as the cost for:

• Labor
• Materials
• Permits
• Etc.

On top of these base costs, you can also keep your agreed price documents available and information about your personnel. You can track whether your head of permitting has filed for the permit or whether the finance team was able to obtain documents from the customer to ensure that they can cover their financial obligations for the project.

Use Project Management Tools

Cash flow analysis for construction projects is possible using the tools that you and your team are already using. For example, cashflow software for QuickBooks can use the data that you already have and begin helping you track cash flow.

However, you’ll also need to use project management tools on top of these financial-related tools.

For example, you may want a tool that offers:

• Bid management
• Accurate project financials
• Design coordination
• Quality and safety logging
• Invoice management
• Real-time visibility
• Connection to contractors
• Workflows

Tools work alongside project managers to help them increase productivity. If you have a more productive team that you can monitor, you can address budget or deadline issues quickly.

Take Advantage of Efficiency Savings by Streamlining Processes

When was the last time that you reviewed your processes? Often, there are hours lost every day to tasks or processes that add no value to the project. You should review these processes to find ways for you to:

• Improve your workflow
• Reduce redundancy
• Save on costs

If you have well-refined processes, you can take advantage of efficiency, allowing you to reduce costs and even finish projects faster.

Implement Policies for Non-standard Costs

Construction is the one industry where costs always seem to be higher than estimates. A major issue with devising a budget for these projects is that non-standard costs arise. Perhaps you’re 80% done with the project and a major, unexpected issue arises that is out of your control.

These non-standard costs must be added into the equation to reach project completion.

One way to tackle this issue is to implement policies for non-standard costs, such as:

• Adding 10% – 20% extra on the cost of the project
• Signing agreements with clients that they will cover these costs
• Asking for payments in integrals based on project completion, such as 25% upfront and 50% when a certain milestone is met

Adding in cash flow monitoring will also help.

Monitor Cash Flow Regularly

If you check your cash flow sporadically, you risk any project going over budget. Instead, you should have tools in place that will monitor your cash flow in real time. Daily analysis will allow you to reduce the risk that a project goes over budget.

Additionally, when these non-standard costs arise, you’ll be able to address them before they swell and become a major issue.

Project managers or whoever is responsible for the project’s budget should have a way to monitor cash flow regularly. In fact, at the start of every day, add checking cash flow into your workflow.

In Conclusion

Project management tools, cash flow management and proper budget estimation will allow you to run a profitable construction company. Over time, if you refine your processes, you’ll improve efficiency and reduce overhead.

Have you ever wondered how international wire transfers work? We’re going to take a look at the general process. Needless to say, all the work going on behind the scenes is rather complex. The good news is, however, if you use an international money transfer app or international wire transfer service, you won’t have to do much of the work.

Below is a general outline of how international wire transfers work. Many software platform developers, financial institutions, and other organizations are simplifying the process and offering competing methods, however.

From the point of view of the end user, the most important factors are probably costs, speed, and security. Quite simply, as an end user, you want an international fund transfer process that is affordable, safe, reliable, and quick. What goes on behind the scenes may not matter so much.

Still, it’s interesting to look at the ghosts in the machines that make our global economy and financial system work. Thus, without further ado, let’s take a look at the basic process for international wire transfers.

The Nuts and Bolts of International Wire Transfers

Amid globalization, more people are on the move and countries are trading more and more with each other. Financial institutions, payment networks, and app developers, among others, have stepped up to support international transfers, which in turn supports migration, travel, and global trade.

International wire transfers are electronic transactions that enable individuals and businesses to send money across borders, from one bank account to another, in different countries. The process involves several financial institutions working together to complete the transfer.

Initiation

The sender, AKA the remitter, will initiate the wire transfer by providing their bank with the necessary details, including the amount to be transferred, the recipient’s name, the recipient’s bank account number, and the recipient’s bank’s SWIFT or BIC code (a unique identifier for banks worldwide). The sender may also need to provide the recipient’s bank address, the purpose of the transfer, and the currency in which the transaction should be completed.

Communication

The sender’s bank, which is also known as the originating bank, communicates the transfer instructions to the recipient’s bank through a secure messaging network. The SWIFT network (Society for Worldwide Interbank Financial Telecommunication) and Fedwire in the United States are two such networks.

More and more networks and communication methods are entering the market, however. In the long run, competition should drive prices down and increase the quality of service.

Intermediary Banks

Depending on the relationship between the originating and recipient banks, the transfer may need to pass through one or more intermediary banks or financial institutions. These financial institutions facilitate the transfer of funds by acting as a link between the sender’s and recipient’s banks.

Each intermediary bank involved in the transaction may charge a fee for its services, which can drive costs up. However, amid globalization, many international money transfer networks are becoming more streamlined, which should result in lower prices and quicker service in the long run.

Currency Conversion

If the wire transfer involves different currencies, the funds will need to be converted. This usually occurs at the recipient’s bank or an intermediary bank, depending on the specific arrangement. The exchange rate applied for the conversion may include a markup added by the bank performing the conversion.

When making international transfers, it’s smart to pay close attention to conversion rates as some financial institutions will offer a bad rate, while others offer fair rates. It’s wise to select an international transfer service or app that offers good conversation rates and low overall fees.

Receiving the Funds

The recipient’s bank, AKA the beneficiary bank, receives the transfer instructions and verifies the details. Once everything is confirmed, the bank credits the recipient’s account with the transferred amount, minus any fees charged by the recipient’s bank.

Confirmation

Both the sender and the recipient will receive confirmation from their respective banks, either through email, SMS, or online banking notifications, once the transfer is complete.

International Transfers Are Now Fast and Easy

The above probably sounds like a lot of work. To their credit, the financial institutions that make international wire transfers possible do indeed work hard. However, for end users, sending money around the world is pretty easy these days if you select the right international payment and money transfer apps and services.