In this publication, we will analyze which are the financial needs to execute the work detailed below.
The work in question is a small civil job comprising the construction of 2 reinforced concrete bases of 10 m3 each.
To carry out this analysis, we draw a Gantt chart up showing each of the tasks to be performed during the construction period.
Then, we load in the Gantt the flow of funds that we need to execute the work.
In short, we draw up an approximate investment plan.
Once the investment plan has been drawn up, it is necessary to define the dates and amounts of the income to be received for advance of the work as payment for the work carried out.
The result between the two tables of values, investments or expenses, and payments or income (payback) determines the need for capital.
Therefore, the above gives us the cash flow of the project.
Financial Cost of the Works – Investment Plan
The figure shows:
- The monthly expenses necessary for the execution of the work.
- The income to be received:
We assume we receive payment 30 days after the monthly certification date.
For the sake of simplicity, we consider that the profit is constant and exceeds the expenses by 30%.
This example shows that the contractor must have its own funds for the first, second and third months.
If he does not have his own funds, he must finance them in order to be able to carry out the work.
Flow of Funds
For clarity, we summarize the data in a table showing the flow of funds required to construct work.
The need for money for the first three months of work generates the financial cost.
For full information read:
Financial Cost of the Works – Calculate Man Hours