Why Cash Flow is important to Contractors?

The highly volatile construction market, the financial structure of contractors and the irregular peaking of demands for finance make building companies very vulnerable to temporary shortages of cash. The problem facing companies is therefore one of convincing the financier, usually a bank, of the fact that the shortage is only temporary. The bank would prefer to see a cash flow forecast of the type illustrated for each project and an aggregated forecast for the company as a whole.

Benefits of Cash Flow

Having a Cash flow is given numerous benefits to the contractor as follows. 

• One of the important advantages is that cash flow can be used for taking initial decision on tendering.
• Also it can be used as a basis for cost control of a particular project as well as for a specific organization.
• Furthermore funds can be arranged for the project by means of a cash flow.
• To get an idea regarding the profit flow during the construction.
• Also it provides facilities to negotiate the payment terms with the client as well as to negotiate credit facilities with the supplier.
• In addition to that by using a cash flow the amount of negative working capital against the time period can be known.