Management Civil I Module 6 – Cash Flows

CASH FLOW STATEMENTS A DOCUMENT WHICH MODELS THE FLOW OF MONEY INTO AND OUT OF THE PROJECT THE TIME FRAME IS USUALLY MONTHLY THE SAME INFO IS USED IN THE BANK STATEMENT THEIR COULD BE DIFFERENT ACCOUNTS (IE WAGES)

We use a cash flow statement in a tabular format to produce the cash flow statement CASH FLOW ITEMS JAN FEB MARCH APRIL MAY JUNE   BRUGHT FORWARD INCOME TOTAL AVAILABLE TOTAL EXPENSES COSTING BALANCE

Using the following info we create the cash flow statement from Jan to June JAN BROUGHT FORWARD R 5000 SALES FORCAST @R10 EACH UNIT CLIENT TAKES 2 MONTHS TO PAY NOV 1000units MAR 500units DEC 1500units APR 1200units JAN 1600units MAY 1300units FEB 900units JUN 1400units COST OF SALES 1 OVERHEADS R 300 / MONTH 2 MATERIALS R2 /UNIT SUPPLIER GIVES ONE MONTH CREDIT 3 LABOUR R1 /UNIT PAID ON MONTH OF USE 4 LOAN REPAYMENT FEB R14000 APRIL R16000 MAY R15000 JUNE R2000

STEPS TO FOLLOW FOR JANUARY JAN BALANCE IS PUT INTO B/F SECTION JAN INCOME FROM NOV DUE TO 2 MONTH DELAY IN CLIENT PAYMENT (1000 *10)=10000 EXPENSES OVERHEADS = R300 USE DEC UNITS FOR JAN AS SUPPLIER GIVES 1 MONTH CREDIT R1500*2=3000 LABOUR OCCURS THE SAME MONTH 1600*1 =1600 LOAN ONLY STARTS IN FEB FILL IN ALL COLUMNS USING THE SAME METHOD CLOSING BALANCE = TOTAL AVAILABLE –TOTAL EXPENSES SOMETIMES WE HAVE A –VE BALANCE WHICH IS PLACED IN BRACKETS

CASH FLOW ITEMS JAN FEB MARCH APRIL MAY JUNE   BRUGHT FORWARD  5000  10100  6700  20100  10600 [ 3400] INCOME  10000  15000 16000  9000   12000 TOTAL AVAILABLE 15000   25100  22700  29100  15600  8600 EXPENSES : Overheads  300 Material R2 / unit  3000 3200 1800   1000  2400  2600 Labour R 1 / unit  1600 900  500  1200  1300  1400 Loan Payments  0  14000  16000  2000 TOTAL EXPENSES 4900   18400  18500  19000  6300 COSTING BALANCE [3400]  2300

EXERCISE 2 FOR A CONTRACT THE CURRENT INTEREST RATE ON BORROWED CAPTIAL IS 14% PROFIT MARGIN IS 8% OF THE CONTRACT VALUE RETENTION IS 10% THERE IS A ONE MONTH DELAY IN PAYMENT RETENTION MONEY IS PAID BACK 6 MONTHS AFTER CONTRACT COMPLETION MONTH 1 2 3 4 5 6 7 8 9 VALUE 3000 4000 6000 8000 2000

THE FOLLOWING HEADINGS ARE USED IN THE CASH FLOW TABLE MONTH 1 2 3 4 5 6 7 8 9 10 11 12 BALANCE BF   INCOME COST RETENTION CUMM RET BALANCE INTEREST DB CR AMOUNT IN BANK

MONTH 1 MONTH 1 BALANCE BF INCOME COS 2778 RETENTION CUMM RET BALANCE (2778) INTEREST DB 32 CR   AMOUNT IN BANK [2810] THERE IS NO BALANCE BF AT THE START OF THE CONTRACT NO INCOME DUE TO ONE MONTH DELAY COST = VALUE/1.08 IE SUBTRACTING THE PROFIT INTEREST IS 14% OF DEBT /12 =R32 AMOUNT IN BANK IS –VE HENCE IN BRACKETS

MONTH2 2 [2810] We carry the value from month 1 forward [2810] 3000 We use the cost of month 2 3000/ 1.08= 2778 We use ret from income =300 We use the income from month 1 due to 1 month delay Balance is [ B BF + COS +RET] - INCOME = 2888 We add the interest which is -ve due to the overdraft We take the [ 2922] forward to month 3 MONTH 2 BALANCE BF [2810] INCOME 3000 COS (2778) RETENTION (300) CUMM RET BALANCE [2888] INTEREST DB 34 CR   AMOUNT IN BANK [2922]

Retention We do all the months in the same manner As we are getting back the retention We keep the project account open until month 16 And then we add the retention

Month 1 2 3 4 10 16 B/Bfwd [2810] [2922] [3972] [3491] [1711] Value 3000 4000 6000 Cost [2778] [3704] [5556] Payment rec 2000 Retention deducted [300] [400] [200] Retention released 4400 Cumulative ret 600 1000 Nett payment rec Total Cost [2888] [3926] [5928] [1691]   Total Interest DB [32] [34] [46] [69] [20]   CR Cash in bank [5997] 2689

CASH FLOW EXAMPLE GIVEN COST MONTH 1 2 3 4 5 COST 1600 2600 6900 4730 1550 10% RETENTION TO AMAX OF 4% CONTRACT VALUE PAID BACK 2 MONTHS AFTER COMPLETION CV=19465.6 @ 4%= 778.62 PROFIT =12% DELAY IN PAYMENT = 30 DAYS INTREST 11% DB 10% CR Payment received 1 month after sales

Month 1 2 3 4 5 6 8 B/Bfwd -1614.6 -2625.65 -6968.14 -4317.9 -575.53 1170.0 Value 1792 2912 7728 5297.6 1736 Cost -1600 -2600 -6900 -4730 -1550 Payment rec Retention deducted -179.2 -291.2 -308.62 Retention released 778.62 Cumulative ret 179.2 470.4 Nett payment rec Total Cost -4393.8 -9816.85 -12006.7 -5867.9   Total -2601.8 -6904.85 -4278.7 -570.3 1160.4 Interest DB -14.67 -23.85 -63.29 -39.2 -5.23   CR 9.67 Cash in bank 1948.6