ABSTRACT
I have attended many management meetings in my time. Cash flow is always high up the agenda. At this point in the proceedings, most of the assembled company can relax and have a snooze, whilst the appointed scapegoat goes through a ‘Gestapo’ type interrogation. It would seem from the exchanges that this person’s incompetence and lack of effort are the key factors giving rise to the company’s chronic lack of funds. Unfortunately, such a view, whilst commonly held, is a gross oversimplification of the real position. In reality, ‘cash flow’ is the responsibility of every individual in the organization, and starts from day one. If work is acquired on an extended payment period or ‘pay when
certified’ basis, with provision for the builder to set off contra charges whenever he feels like it, if orders are placed with suppliers and specialist sub-contractors at unfavourable terms, if labour resources are assigned and expended without regard to the tendered allowances, if variations are accepted and implemented without any real attempt to incorporate them in the current interim application, if delays and disruptions go un-recorded and un-notified, if ‘special measures’ such as weekend working and imported labour are undertaken without any prior agreement, if essential site records such as site diaries and time allocations are neglected, if office records and systems such as wages and invoices are not readily accessible and user-friendly, then there will be ‘bad cash flow’. In other words, all the various functions need to be geared from the
outset towards ‘good cash flow’. This starts with the tendering process, where every attempt should be made to qualify and/or reject onerous terms. In my experience, a builder will often be willing to negotiate,
contract agreement or order should be carefully vetted to ensure that it faithfully represents what has been agreed. Arrangements with suppliers and specialists should be ‘back to back’ wherever possible, so as to avoid subsequent ‘piggy in the middle’ situations. The programming and resourcing of the job should be done with one eye on the tender allowances. Labour costs should not just be allowed to happen, which is surprisingly often the case. Site staff should be encouraged to notify the builder immediately there is any kind of delay or disruption, and to keep detailed records. Similarly with variations. The builder should be kept fully informed at all times regarding anything which may affect completion or costs. Variations and claims should be kept fully up to date. Utopia? Maybe. However, it is clear from the above that good cash
flow should be the job of everyone in the firm. Only if we face up to this basic fact can we stand a chance of survival.
